Founders Need to Be Ruthless When Chasing Deals

Posted on April 16, 2024 by steve blank

One of the most exciting things a startup CEO in a business-to-business market can hear from a potential customer is, “We’re excited. When can you come back and show us a prototype?”

This can be the beginning of a profitable customer relationship or a disappointing sinkhole of wasted time, money, resources, and a demoralized engineering team.

It all depends on one question every startup CEO needs to ask.

I was having coffee and pastries with Justin, an ex-student, listening to him to complain over the time he wasted with a potential customer. He was building a complex robotic system for factories. “We spent weeks integrating the sample data they gave us to build a functional prototype, and then after our demo they just ghosted us. I still don’t know what happened!”

After listening to how he got into that predicament, I realized it sounded exactly like the mistake I had made selling enterprise software.

Enthusiasm Versus Validation
Finding product/market fit is the holy grail for startups. For me, it was a real rush when potential users in a large company loved our slideware and our minimum viable product (MVP). They were ecstatic about the time the product could save them and started pulling others into our demos. A few critical internal recommenders and technical evaluators gave our concept the thumbs up. Now we were in discussions with the potential buyers who had the corporate checkbook, and they were ready to have a “next step” conversation.

This buyer wanted us to transform our slideware and MVP into a demonstration of utility with their actual data. This was going to require our small, overcommitted engineering team to turn the MVP into a serviceable prototype.

When I heard a potential customer offer us their own internal customer data I was already imagining popping Champagne corks once we showed them our prototype. (For context, our products sold for hundreds of thousands of dollars, and lifetime value to each customer was potentially measured in millions.) I rallied our engineering team to work for the next few months to get the demo of the prototype ready. As much as we could, we integrated the customers’ users and technical evaluators into our prototype development process. Then came the meeting with the potential customer. And it went great. The users were in the room, the buyer asked lots of questions, everyone made some suggestions and then we all went home. And the follow up from the potential customer? Crickets…

Even our user advocates stopped responding to emails.

What did I do wrong?
In my unbridled and very naive enthusiasm for impressing a potential customer, I made a rookie mistake – I never asked the user champion or the potential buyer what were the steps for turning the demo into a purchase order. I had made a ton of assumptions – all of them wrong. And most importantly I wasted the most precious things a startup has – engineering resources, time, and money.

In hindsight I had no idea whether my potential customer was asking other companies to demo their product. I had no idea whether the buyer had a budget or even purchase authority. If they did, I had no idea of their timeline for a decision. I had no idea who were the other decision-makers in the company to integrate, deploy and scale the product. I didn’t even know what the success criteria for getting an order looked like. I didn’t check for warning signs of a deal that would go nowhere: whether the person requesting the demo was in a business unit or a tech evaluation/innovation group, whether they’d pay for a functional prototype they could use, etc.  And for good measure, I never even considered asking the potential customer to pay for the demo and/or my costs.

(My only excuse was that this was my first foray into enterprise sales.)

Be Ruthless about the Opportunity Costs of Chasing Deals
After that demoralizing experience I realized that every low probability demo got us further from success rather than closer. While a big company could afford to chase lots of deals I just had a small set of engineering resources. I became ruthless about the opportunity costs of chasing deals whose outcome I couldn’t predict.

So we built rigor into our sales process.

We built a sales road map of finding first product/market fit with the users and recommenders. However, we realized that there was a second product/market fit with the organization(s) that controlled the budget and the path to deployment and scale.

For this second group of gatekeepers we came up with a cheap hack to validate that a demo wasn’t just a tire-kicking exercise on their part. First, we asked them basic questions about the process: the success criteria, the decision timeline, did a budget exist, who had the purchase authority, what were the roles and approval processes of other organizations (IT, Compliance and Security, etc.) and what was the expected rate of scaling the product across their enterprise. (All the rookie questions I should have asked the first time around.)

That was just the starting point to decide if we wanted to invest our resources. We followed up our questions by sending them a fully cancelable purchase order. We listed all the features we had demoed that had gotten the users excited and threw in the features the technical evaluators had suggested. And we listed our price. In big letters the purchase order said, “FULLY CANCELABLE.” And then we sent it to the head of the group that asked us for the prototype.

As you can imagine most of the time the response was – WTF?

Figure Out Who’s A Serious Prospect
That’s when the real learning started. It was more than OK with me if they said they weren’t ready to sign. Or they told me there were other groups who needed be involved. I was now learning things I never would have if I just showed up with a prototype. By asking the customer to sign a fully cancelable purchase order we excluded “least likely to close prospects”; those who weren’t ready to make a purchase decision, or those who already had a vendor selected but needed to go through “demo theater” to make the selection seem fair. But most importantly it started a conversation with serious prospects that informed us about the entire end-to-end approval process to get an order- who were the additional people who needed to say yes across the corporation – and what were their decision processes.

Our conversions of demos into orders went through the roof.

Finally, I was learning some of the basics of complex sales.

—

Justin stared at his uneaten pastry for a while and then looked up at me and said smiling, “I never knew you could do that. That’s given me a few ideas what we could do.”  And just like that he was gone.

Lessons Learned

  • In complex sales there are multiple product/market fits – Users, Buyers, etc. — each with different criteria
  • Don’t invest time and resources in building on-demand prototypes if you don’t know the path to a purchase order
  • Use polite forcing functions, e.g. cancelable purchase orders, to discover who else needs to say “yes”

Filed under: Customer Development, E.piphany | 10 Comments »

Apple Vision Pro – Tech in the Search of a Market

Posted on February 13, 2024 by steve blank

A version of this article previously appeared in Fortune.

If you haven’t been paying attention Apple has started shipping its Apple Vision Pro, its take on a headset that combines Virtual Reality (VR) and Augmented Reality (AR). The product is an amazing technical tour de force.

But the product/market fit of this first iteration is a swing and a miss.

I’ve watched other world class consumer product companies make the same mistakes:

  1. Come up with amazing hardware that creates entirely new capabilities
  2. Forecast demand based on volumes of their previous consumer products
  3. Confuse consumers by defining a new category without a frame of reference
  4. Discover the hardware doesn’t match their existing consumer customer base needs
  5. Work hard (read spend a lot of money) on trying to “push” sales to their existing customers
  6. Revenue is woefully short of forecast. Marketing and capital expenses (new factory, high R&D expense) were predicated on consumer-scale sales. The new product is burning a ton of cash
  7. Ignore/not understand adjacent niche markets that would have “pulled” the product out of their hands, if they had developed niche-specific demos and outreach
  8. Eventually pivot to the niche markets that are excited about the product
  9. The niche markets make great beachhead markets, but are too small to match the inflated forecasts and the built-in burn rates of consumer scale sales
  10. Either…
    • After multiple market pivots and changes in leadership, abandon the product
    • Pivot and perserve

Déjà vu All Over Again
I lived the equivalent of this when Kodak (remember them?) launched a product in 1990 called PhotoCD. Kodak wanted consumers to put their film photos on their home CDROM drive and then display them on their televisions. You dropped off your film at a film processor and instead of just getting physical prints of your pictures they would scan the film, and burn them onto a Compact Disc. You’d go home with a Compact Disc with your pictures on it.

I got a preview of PhotoCD when I was the head of marketing at SuperMac, a supplier of hardware and software for graphics professionals. The moment I saw the product I knew every one of my professional graphics customers (ad agencies, freelancers, photo studios, etc.) would want to use it. In fact, they would have paid a premium for it. I was floored when Kodak told me they were launching PhotoCD as a consumer product.

The problem was that in 1990 consumers did not have CDROM drives to display the pictures. At the time even most personal computers lacked them. But every graphics professional did own a CDROM drive but most didn’t own a high-resolution film scanner – and PhotoCD would have been perfect for them – and the perfect launch customer. To this day I remember being lectured by a senior Kodak executive, “Steve you don’t get it, we’re experts at selling to consumers. We’ll sell them the CDROM drives as well.”  (The Kodak CDROM drives were the size of professional audio equipment and depending on the model, costing $600-$1000 in today’s dollars.)

(And when consumer CDROM drives became available they couldn’t play the PhotoCD disks as they were encoded in a proprietary Kodak standard to lock you into their drives!)  The result was that PhotoCD failed miserably as a consumer product. Subsequent pivots to professional graphics users (a segment another part of Kodak knew well) came too late, as low cost scanners and non-proprietary standards (JPEG) prevailed.

So what’s the lesson for Apple?

  1. Apple is trying to push Vision Pro into their existing consumer customers
  2. All the demos and existing applications are oriented to their consumer customers
  3. Apple did not create demos for how the Vision Pro could be used in new markets where users would jump on buying a Vision Pro. For example,
    1. There is proof of demand (here, here and here) of an adjacent mass market, helping millions of home owners repair things around the home
    2. There is proof of demand in industrial applications outside of the consumer space (here.) Every company that has complex machinery have been experimenting with AR for years. Imagine car repair with a Vision Pro AR tutorial. Or jet engine maintenance. Or the entire gamut of complex machinery.

All of these would have been great Vision Pro demos for training and repair. It’s hard to understand why Apple ignored these easy wins.

Getting it Right
Apple’s entry into new markets by creating new product categories –  iPods, iPads, iPhones – is unprecedented in the history of the modern corporation – $300 billion (75% of their revenue) is from non-computer hardware. In addition, they’ve created an entirely new $85+ billion subscription business model; the App Store, iTunes, Apple Care, Apple Pay, Apple Cash, Apple Arcade, Apple Music, Apple TV.

It’s hard to remember, but the first version of these products launched with serious limitations that follow-on versions remedied. The first version of the iPhone only ran Apple software, it was a closed system without an app store, had no copy and paste, couldn’t record video, etc. The original Apple Watch was positioned as a fashion accessory. It wasn’t until later that Apple realized that the killer apps for the Watch were fitness and health. Fixing the technical flaws while finding the right markets for all these products took time and commitment.

The same will likely be true for the Vision Pro. Apple marketers will realize that adjacent spaces they are less familiar with will provide the first “got to have it” beachhead markets. Newer versions will ride the technology wave of lighter, and cheaper versions.

Apple’s CEO Tim Cook has made a personal bet on the Vision Pro. More than any other company they have sufficient resources (cash on hand and engineering talent) to pivot their way to product/market fit in the real markets that need it.

Here’s hoping they find it.

Filed under: Customer Development | 15 Comments »

Profound Beliefs

Posted on September 5, 2023 by steve blank

This post previously appeared in EIX.

In the early stages of a startup your hypotheses about all the parts of your business model are your profound beliefs. Think of profound beliefs as “strong opinions loosely held.”

You can’t be an effective founder or in the C-suite of a startup if you don’t hold any.

Here’s how I learned why they were critical to successful customer development.

I was an aggressive, young and a very tactical VP of marketing at Ardent, a supercomputer company – who really hadn’t a clue about the relationship between profound beliefs, customer discovery and strategy.

One day the CEO called me into his office and asked, “Steve I’ve been thinking about this as our strategy going forward. What do you think?” And he proceeded to lay out a fairly complex and innovative sales and marketing strategy for our next 18 months.  “Yeah, that sounds great,” I said. He nodded and then offered up, “Well what do you think of this other strategy?” I listened intently as he spun an equally complex alternative strategy. “Can you pull both of these off?” he asked looking right at me.  By the angelic look on his face I should have known that I was being set up. I replied naively, “Sure, I’ll get right on it.”

Ambushed
Decades later I still remember what happened next. All of a sudden the air temperature in the room dropped by about 40 degrees. Out of nowhere the CEO started screaming at me, “You stupid x?!x. These strategies are mutually exclusive. Executing both of them would put us out of business. You don’t have a clue about what the purpose of marketing is because all you are doing is giving engineering a list of feature requests and executing a series of tasks like they’re like a big To Do list. Without understanding why you’re doing them, you’re dangerous as the VP of Marketing, in fact you’re just a glorified head of marketing communications.  You have no profound beliefs.”

I left in a daze, angry and confused. There was no doubt my boss was a jerk, but I didn’t understand the point. I was a great marketer. I was getting feedback from customers, and I’d pass on every list of what customers wanted to engineering and tell them that’s the features our customers needed. I could implement any marketing plan handed to me regardless of how complex. In fact I was implementing three different ones. Oh…hmm… perhaps I was missing something.

I was executing a lot of marketing “things” but why was I doing them? The CEO was right. I had approached my activities as simply a task-list to get through. With my tail between my legs I was left to ponder: What was the function of marketing in a startup? And more importantly, what was a profound belief and why was it important?

Hypotheses about Your Business Model = Your Profound Beliefs Loosely Held
Your hypotheses about all the parts of your business model are your profound beliefs. Think of them as strong opinions loosely held. You can’t be an effective founder or in the C-suite if you don’t have any.

The whole role of customer discovery and validation outside your building is to inform your profound beliefs. By inform I mean use the evidence you gather outside the building to either validate your beliefs/hypotheses, invalidate or modify them.  Specifically, what beliefs and hypotheses?  Start with those around product/market fit – who are your customers and what features do they want? Who are the payers? Then march through the rest of the business model. What price will they pay? What role do regulators pay? Etc. The best validation you can get is an order. (BTW, if you’re creating a new market, it’s even OK to ignore customer feedback but you have to be able to articulate why.)

The reality of a startup is that that on day one most of your beliefs/hypotheses are likely wrong. However, you will be informed by those experiments outside the building, and data from potential customers, partners, regulators, et al will modify your vision over time.

It’s helpful to diagram the consequences between hypotheses/ beliefs and customer discovery. (See the diagram)

If you have no beliefs and haven’t gotten out of the building to gather evidence, then your role inside a new venture is neutral. You act as a tactical implementer as you add no insight/or value to product development.

If you’ve gotten out of the building to gather evidence but have no profound beliefs to guide your inquiries, then your role inside a new venture is negative. You’ll collect a laundry-list of customer feature requests and deliver them to product development, without any insight. This is essentially a denial of service attack on engineering’s time. (I was mostly operating in this box when I got chewed out by our CEO.)

The biggest drag on a startup is those who have strong beliefs but haven’t gotten out of the building to gather evidence. Meetings become opinion contests and those with the loudest voices (or worse “I’m the CEO and my opinion matters more than your facts”) dominate planning and strategy.  (They may be right, but Twitter/X is an example where Elon is in the box on the bottom right of the diagram. )

The winning combination is strong beliefs that are validated or modified by evidence gathered outside the building. These are “strong opinions loosely held.”

Strategy is Not a To Do List, It Drives a To Do List
It took me awhile, but I began to realize that the strategic part of my job was to recognize that (in today’s jargon) we were still searching for a scalable and repeatable business model. Therefore my job was to:

  • Articulate the founding team’s strong beliefs and hypotheses about our business model
  • Do an internal check-in to see if a) the founders were aligned and b) if I agreed with them
  • Get out of the building and test our strong beliefs and hypotheses about who were potential customers, what problems they had and what their needs were
  • Test product development’s/engineering’s beliefs about customer needs with customer feedback
  • When we found product/market fit, marketing’s job was to put together a strategy/plan for marketing and sales. That should be easy. If we did enough discovery customers would have told us what features were important to them, how we compare to competitors, how we should set prices, and how to best sell to them

Once I understood the strategy, the tactical marketing To Do list (website, branding, pr, tradeshows, white papers, data sheets) became clear. It allowed me to prioritize what I did, when I did it and instantly understand what would be mutually exclusive.

Lessons Learned

  • Profound beliefs are your hypotheses about all the parts of your business model
    • No profound beliefs but lots of customer discovery ends up as a feature list collection which is detrimental to product development
    • Profound beliefs but no customer discovery ends up as opinion contests and those with the loudest voices dominate
  • The winning combination is strong beliefs that are validated or modified by evidence gathered outside the buildingThese are “strong opinions loosely held.”

Filed under: Customer Development | 6 Comments »

Lean Meets Wicked Problems

Posted on July 25, 2023 by steve blank

This post previously appeared in Poets & Quants.

I just spent a month and a half at Imperial College London co-teaching a “Wicked” Entrepreneurship class. In this case Wicked doesn’t mean morally evil, but refers to really complex problems, ones with multiple moving parts, where the solution isn’t obvious. (Understanding and solving homelessness, disinformation, climate change mitigation or an insurgency are examples of wicked problems. Companies also face Wicked problems. In contrast, designing AI-driven enterprise software or building dating apps are comparatively simple problems.)

I’ve known Professor Cristobal Garcia since 2010 when he hosted my first visit to Catholic University in Santiago of Chile and to southern Patagonia. Now at Imperial College Business School and Co-Founder of the Wicked Acceleration Labs, Cristobal and I wondered if we could combine the tenets of Lean (get out of the building, build MVPs, run experiments, move with speed and urgency) with the expanded toolset developed by researchers who work on Wicked problems and Systems’ Thinking.

Our goal was to see if we could get students to stop admiring problems and work rapidly on solving them. As Wicked and Lean seem to be mutually exclusive, this was a pretty audacious undertaking.

This five-week class was going to be our MVP.

Here’s what happened.

Finding The Problems
Professor Garcia scoured the world to find eight Wicked/complex problems for students to work on. He presented to organizations in the Netherlands, Chile, Spain, the UK (Ministry of Defense and the BBC), and aerospace companies. The end result was a truly ambitious, unique, and international set of curated Wicked problems.

  • Increasing security and prosperity amid the Mapuche conflict in Araucania region of Chile
  • Enabling and accelerating a Green Hydrogen economy
  • Turning the Basque Country in Spain into an AI hub
  • Solving Disinformation/Information Pollution for the BBC
  • Creating Blue Carbon projects for the UK Ministry of Defense
  • Improving patient outcomes for Ukrainian battlefield injuries
  • Imagining the future of a low-earth-orbit space economy
  • Creating a modular architecture for future UK defense ships

Recruiting the Students
With the problems in hand, we set about recruiting students from both Imperial College’s business school and the Royal College of Art’s design and engineering programs.

We held an info session explaining the problems and the unique parts of the class. We were going to share with them a “Swiss Army Knife” of traditional tools to understand Wicked/Complex problems, but they were not going to research these problems in the library. Instead, using the elements of Lean methodology, they were going to get out of the building and observe the problems first-hand. And instead of passively observing them, they were going to build and test MVPs.  All in six weeks.

50 students signed up to work on the eight problems with different degrees of “wickedness”.

Imperial Wicked Problems and Systems Thinking – 2023 Class

The Class
The pedagogy of the class (our teaching methods and the learning activities) were similar to all the Lean/I-Corps and Hacking for Defense classes we’ve previously taught. This meant the class was team-based, Lean-driven (hypothesis testing/business model/customer development/agile engineering) and experiential – where the students, rather than being presented with all of the essential information, must discover that information rapidly for themselves.

The teams were going to get out of the building and talk to 10 stakeholder a week. Then weekly each team will present 1) here’s what we thought, 2) here’s what we did, 3) here’s what we learned, 4) here’s what we’re going to do during this week.

More Tools
The key difference between this class and previous Lean/I-Corps and Hacking for Defense classes was that Wicked problems required more than just a business model or mission model to grasp the problem and map the solution. Here, to get a handle on the complexity of their problem the students needed a suite of tools –  Stakeholder Maps, Systems Maps, Assumptions Mapping, Experimentation Menus, Unintended Consequences Map, and finally Dr. Garcia’s derivative of the Alexander Osterwalder’s Business Model Canvas – the Wicked Canvas – which added the concept of unintended consequences and the “sub-problems” according to the different stakeholders’ perspectives to the traditional canvas.

During the class the teaching team offered explanations of each tool, but the teams got a firmer grasp on Wicked tools from a guest lecture by Professor Terry Irwin, Director of the Transition Design Institute at Carnegie Mellon (see her presentation here.) Throughout the class teams had the flexibility to select the tools they felt appropriate to rapidly gain an holistic understanding and yet to develop a minimum viable product to address and experiment with each of the wicked problems.

Class Flow
Week 1 

  • What is a simple idea? What are big ideas and Impact Hypotheses? 
    • Characteristics of each. Rewards, CEO, team, complexity, end point, etc. 
  • What is unique about Wicked Problems?
    • Beyond TAM and SAM (“back of the napkin”) for Wicked Problems
  • You need Big Ideas to tackle Wicked Problems: but who does it?
    •  Startups vs. Large Companies vs. Governments
    • Innovation at Speed for Horizon 1, 2 and 3 (Managing the Portfolio across Horizons)
  • What is Systems Thinking?
  • How to map stakeholders and systems’ dynamics?
  • Customer & Stakeholder Discovery: getting outside the building, city and country: why and how? 

Mapping the Problem(s), Stakeholders and Systems –  Wicked Tools

Week 2

  • Teams present for 6 min and receive 4 mins feedback
  • The Wicked Swiss Army Knife for the week: Mapping Assumptions Matrix, unintended consequences and how to run and design experiments
  • Prof Erkko Autio (ICBS and Wicked Labs) on AI Ecosystems and Prof Peter Palensky (TU Delft) on Smart Grids, Decarbornization and Green Hydrogen
  • Lecture on Minimal Viable Products (MVPs) and Experiments
  • Homework: getting outside the building & the country to run experiments

Assumption Mapping and Experimentation Type –  Wicked Tools

Week 3

  • Teams present in 6 min and receive 4 mins feedback
  • The Wicked Swiss Army Knife for the week: from problem to solution via “How Might We…” Builder and further initial solution experimentation
  • On Canvases: What, Why and How 
  • The Wicked Canvas 
  • Next Steps and Homework: continue running experiments with MVPs and start validating your business/mission/wicked canvas

The Wicked Canvas –  Wicked Tools

Experimentation Design and How We Might… –  Wicked Tools

Week 4

  • Teams present in 6 min and receive 5 mins feedback
  • Wicked Business Models – validating all building blocks
  • The Geography of Innovation – the milieu, creative cities & prosperous regions 
  • How World War II and the UK Started Silicon Valley
  • The Wicked Swiss Tool-  maps for acupuncture in the territory
  • Storytelling & Pitching 
  • Homework: Validated MVP & Lessons learned

Acupuncture Map for Regional System Intervention  – Wicked Tools


Week 5

  • Teams presented their Final Lessons Learned journey – Validated MVP, Insights & Hindsight (see the presentations at the end of the post.)
    • What did we understand about the problem on day 1?
    • What do we now understand?
    • How did we get here?
    • What solutions would we propose now?
    • What did we learn?
    • Reflections on the Wicked Tools

Results
To be honest, I wasn’t sure what to expect. We pushed the students way past what they have done in other classes. In spite of what we said in the info session and syllabus, many students were in shock when they realized that they couldn’t take the class by just showing up, and heard in no uncertain terms that no stakeholder/customer interviews in week 1 was unacceptable.

Yet, everyone got the message pretty quickly. The team working on the Mapuche conflict in the Araucania region of Chile, flew to Chile from London, interviewed multiple stakeholders and were back in time for next week’s class. The team working to turn the Basque Country in Spain into an AI hub did the same – they flew to Bilbao and interviewed several stakeholders. The team working on the Green Hydrogen got connected to the Rotterdam ecosystem and key stakeholders in the Port, energy incumbents, VCs and Tech Universities. The team working on Ukraine did not fly there for obvious reasons. The rest of the teams spread out across the UK – all of them furiously mapping stakeholders, assumptions, systems, etc., while proposing minimal viable solutions. By the end of the class it was a whirlwind of activity as students not only presented their progress but saw that of their peers. No one wanted to be left behind. They all moved with speed and alacrity.

Lessons Learned

  • Our conclusion? While this class is not a substitute for a years-long deep analysis of Wicked/complex problems it gave students:
    • a practical hands-on introduction to tools to map, sense, understand and potentially solve Wicked Problems
    • the confidence and tools to stop admiring problems and work on solving them
  • I think we’ll teach it again.

Team final presentations

The team’s final lessons learned presentations were pretty extraordinary, only matched by their post-class comments. Take a look below.

Team Wicked Araucania

Click here if you can’t see the Araucania presentation.

Team Accelerate Basque

Click here if you can’t see the Accelerate Basque presentation.

Team Green Hydrogen

Click here if you can’t see the Green Hydrogen presentation.

Team Into The Blue

Click here if you can’t see the Team Blue presentation.

Team Information Pollution

Click here if you can’t see the Team Information Pollution presentation.

Team Ukraine

Click here if you can’t see the Team Ukraine presentation.

Team Wicked Space

Click here if you can’t see the Team Wicked Space presentation.

Team Future Proof the Navy

Click here if you can’t see the Future Proof the Navy presentation.



Filed under: Customer Development, Lean LaunchPad, Teaching | 9 Comments »

Be Where Your Business Is

Posted on January 10, 2023 by steve blank

This post previously appeared on the readwrite blog.

 

A CEO running a B-to-B startup in needs to live in the city where their business is – or else they’ll never scale.

I was having breakfast with Erin, an ex-student, just off a red-eye flight from New York. She’s built a 65-person startup selling enterprise software to the financial services industry. Erin had previously worked in New York for one of those companies and had a stellar reputation in the industry. As one would expect, with banks and hedge funds as customers, the majority were based in the New York metropolitan area.

Where Are Your Biggest Business Deals?
Looking a bit bleary-eyed, Erin explained, “Customers love our product, and I think we’ve found product/market fit. I personally sold the first big deals and hired the VP of sales who’s building the sales team in our New York office. They’re growing the number of accounts and the deal size, but it feels like we’re incrementally growing a small business, not heading for exponential growth. I know the opportunity is much bigger, but I can’t put my finger on what’s wrong.”

Erin continued, “My investors are starting to get impatient. They’re comparing us to another startup in our space that’s growing much faster. My VP of Sales and I are running as fast as we can, but I’ve been around long enough to know I might be the ex-CEO if we can’t scale.”

While Erin’s main sales office is in New York, next to her major prospects and customers, Erin’s company was headquartered in Silicon Valley, down the street from where we were having breakfast. During the Covid pandemic, most of her engineering team worked remotely. Her inside sales team (Sales Development and Business Development reps) used email, phone, social media and Zoom for prospecting and generating leads. At the same time, her account executives were able to use Zoom for sales calls and close and grow business virtually.

There’s a Pattern Here
Over breakfast, I listened to Erin describe what at first seemed like a series of disconnected events.

First, a new competitor started up. Initially, she wasn’t concerned as the competitor’s product had only a subset of the features that Erin’s company did. However, the competitor’s headquarters was based in New York, and their VP of Sales and CEO were now meeting face-to-face with customers, most of whom had returned to their offices. While Erin’s New York-based account execs were selling to the middle tier management of organizations, the CEO of her competitor had developed relationships with the exec staff of potential customers. She lamented, “We’ve lost a couple of deals because we were selling at the wrong level.”

Second, Erin’s VP of sales had just bought a condo in Miami to be next to her aging parents, so she was commuting to NY four days a week and managing the sales force from Miami when she wasn’t in New York. Erin sighed, “She’s as exhausted as I am flying up and down the East Coast.”

Third, Erin’s account execs were running into the typical organizational speedbumps and roadblocks that closing big deals often encounter. However, solving them via email, Zoom and once-a-month fly-in meetings wasn’t the same as the NY account execs being able to say, “Hey, our VP of Sales and CEO are just down the street. Can we all grab a quick coffee and talk this over?” Issues that could have been solved casually and quickly ballooned into ones that took more work and sometimes a plane trip for her VP of Sales or Erin to solve.

By the time we had finished breakfast it was clear to me that Erin was the one putting obstacles in front of her path to scale. Here’s what I observed and suggested.

Keep Your Eye on The Prize
While Erin had sold the first deals herself, she needed to consider whether each deal happened because as CEO, she could call on the company’s engineers to pivot the product. Were the account execs in New York trying to execute a sales model that wasn’t yet repeatable and scalable without the founder’s intervention? Had a repeatable and scalable sales process truly been validated? Or did each sale require a heroic effort?

Next, setting up their New York office without Erin or her VP of Sales physically living in New York might have worked during Covid but was now holding her company back. At this phase of her company the goal of the office shouldn’t be to add new accounts incrementally – but should be how to scale – repeatably. Hiring account execs in an office in New York let Erin believe that she had a tested, validated, and repeatable sales playbook that could rapidly scale the business. The reality was that without her and the VP of Sales living and breathing the business in New York, they were trying to scale a startup remotely.

Her early customers told Erin that her company had built a series of truly disruptive financial service products. But now, the company was in a different phase – it needed to build and grow the business exponentially. And in this phase, her focus as a CEO needed to change – from searching for product/market fit to driving exponential growth.

Exponential Growth Requires Relentless Execution
Because most of her company’s customers were concentrated in a single city, Erin and her VP of Sales needed to be there – not visiting in a hotel room. I suggested that:

  • Erin had to quickly decide if she wanted to be the one to scale the business. If not, her investors were going to find someone who could.
  • If so, she needed to realize that she had missed an important transition in her company. In a high-dollar B-to-B business, building and scaling sales can’t be done remotely. And she was losing ground every day. Her New York office needed a footprint larger than she was. It needed business development and marketing people rapidly creating demand.
  • Her VP of Sales might be wonderful, but with the all the travel the company is only getting her half-time. Erin needs a full-time head of sales in New York. Time to have a difficult conversation.
  • Because she was behind, Erin needed to rent an apartment in New York for a year, and spend the next six months there and at least two weeks a month after that. Her goal was to:
    • 1) Validate that there was a repeatable sales process. It not, build one
    • 2) Build a New York office that could create a sales and marketing footprint without her presence. Only then could she cut back her time in the City.
  • Finally, she needed to consider that if her customers were primarily in New York and the engineers were working remotely, why weren’t the company headquarters in New York?

I Hate New York
As we dug into these issues, I was pretty surprised to hear her say, “I spent a big part of my career in New York. I thought coming out to Stanford and the West Coast meant I could leave the bureaucracy of large companies and that culture behind. Covid let me do that for a few years. I guess now I’m just avoiding jumping back into an environment I thought I had left.”

We lingered over coffee as I suggested it was time for her to take stock of what’s next. She had something rare – a services company that provided real value with products that early customers loved. Her staff didn’t think they were joining a small business, neither did her investors. If she wasn’t prepared to build something to its potential, what was her next move?

Lessons Learned

  • For a startup, the next step after finding product/market fit is finding a repeatable and scalable sales process
  • This requires a transition to the relentless execution of creating demand and exponentially growing sales
  • If your customers are concentrated in a city or region, you need to be where your customers are
  • The CEO needs to lead this growth focus
  • And then hand it off to a team equally capable and committed

Filed under: Corporate/Gov't Innovation, Customer Development | 6 Comments »

A Simple Map for Innovation at Scale

Posted on October 25, 2022 by steve blank

An edited version of this article previously appeared in the Boston Consulting Group’s strategy think tank website.

I spent last week at a global Fortune 50 company offsite watching them grapple with disruption. This 100+-year-old company has seven major product divisions, each with hundreds of products. Currently a market leader, they’re watching a new and relentless competitor with more money, more people and more advanced technology appear seemingly out of nowhere, attempting to grab customers and gain market share.

This company was so serious about dealing with this threat (they described it as “existential to their survival”) that they had mobilized the entire corporation to come up with new solutions. This wasn’t a small undertaking, because the threats were coming from multiple areas in multiple dimensions; How do they embrace new technologies? How do they convert existing manufacturing plants (and their workforce) for a completely new set of technologies? How do they bring on new supply chains? How do they become present on new social media and communications channels? How do they connect with a new generation of customers who had no brand loyalty? How to they use the new distribution channels competitors have adopted? How do they make these transitions without alienating and losing their existing customers, distribution channels and partners? And how do they motivate their most important asset – their people – to operate with speed, urgency, and passion?

The company believed they had a handful of years to solve these problems before their decline would become irreversible. This meeting was a biannual gathering of all the leadership involved in the corporate-wide initiatives to out-innovate their new disruptors. They called it the “Tsunami Initiative” to emphasize they were fighting the tidal wave of creative destruction engulfing their industry.

To succeed they realized this isn’t simply coming up with one new product. It meant pivoting an entire company – and its culture. The scale of solutions needed dwarf anything a single startup would be working on.

The company had hired a leading management consulting firm that helped them select 15 critical areas of change the Tsunami Initiative was tasked to work on. My hosts, John and Avika, at the offsite were the co-leads overseeing the 15 topic areas. The consulting firm suggested that they organize these 15 topic areas as a matrix organization, and the ballroom was filled with several hundred people from across their company –  action groups and subgroups with people from across the company: engineering, manufacturing, market analysis and collection, distribution channels, and sales. Some of the teams even included some of their close partners. Over a thousand more were working on the projects in offices scattered across the globe.

John and Avika had invited me to look at their innovation process and offer some suggestions.

Are these the real problems?
This was one of the best organized innovation initiatives I have seen. All 15 topic had team leads presenting poster sessions, there were presenters from the field sales and partners emphasizing the urgency and specificity of the problems, and there were breakout sessions where the topic area teams brainstormed with each other. After the end of the day people gathered around the firepit for informal conversations. It was a testament to John and Avika’s leadership that even off duty people were passionately debating how to solve these problems. It was an amazing display of organizational esprit de corps.

While the subject of each of the 15 topic areas had been suggested by the consulting firm, it was in conjunction with the company’s corporate strategy group, and the people who generated these topic area requirements were part of the offsite. Not only were the requirements people in attendance but so was a transition team to facilitate the delivery of the products from these topic teams into production and sales.

However, I noticed that several of the requirements from corporate strategy seemed to be priorities given to them from others (e.g. here are the problems the CFO or CEO or board thinks we ought to work on) or likely here are the topics the consulting firm thought they should focus on) and/or were from subject matter experts (e.g. I’m the expert in this field. No need to talk to anyone else; here’s what we need). It appeared the corporate strategy group was delivering problems as fixed requirements, e.g. deliver these specific features and functions the solution ought to provide.

Here was a major effort involving lots of people but missing the chance to get the root cause of the problems.

I told John and Avika that I understood some requirements were known and immutable. However, when all of the requirements are handed to the action teams this way the assumption is that the problems have been validated, and the teams do not need to do any further exploration of the problem space themselves.

Those tight bounds on requirements constrain the ability of the topic area action teams to:

  • Deeply understand the problems – who are the customers, internal stakeholders (sales, other departments) and beneficiaries (shareholders, etc.)? How to adjudicate between them, priority of the solution, timing of the solutions, minimum feature set, dependencies, etc.
  • Figure out whether the problem is a symptom of something more important
  • Understand whether the problem is immediately solvable, requires multiple minimum viable products to test several solutions, or needs more R&D

I noticed that with all of the requirements fixed upfront, instead of having a freedom to innovate, the topic area action teams had become extensions of existing product development groups. They were getting trapped into existing mindsets and were likely producing far less than they were capable of. This is a common mistake corporate innovation teams tend to make.

I reminded them that when team members get out of their buildings and comfort zones, and directly talk to, observe, and interact with the customers, stakeholders and beneficiaries, it allows them to be agile, and the solutions they deliver will be needed, timely, relevant and take less time and resources to develop. It’s the difference between admiring a problem and solving one.

As I mentioned this, I realized having all fixed requirements is a symptom of something else more interesting – how the topic leads and team members were organized. From where I sat, it seemed there was a lack of a common framework and process. 

Give the Topic Areas a Common Framework
I asked John and Avika if they had considered offering the topic action team leaders and their team members a simple conceptual framework (one picture) and common language. I suggested this would allow the teams to know when and how to “ideate” and incorporate innovative ideas that accelerate better outcomes. The framework would use the initial corporate strategy requirements as a starting point rather than a fixed destination. See the diagram.

I drew them a simple chart and explained that most problems start in the bottom right box.

These are “unvalidated” problems. Teams would use a customer discovery process to validate them. (At times some problems might require more R&D before they can be solved.) Once the problems are validated, teams move to the box on the bottom left and explore multiple solutions. Both boxes on the bottom are where ideation and innovation-type of problem/solution brainstorming are critical. At times this can be accelerated by bringing in the horizon 3, out-of-the-box thinkers that every company has, and let them lend their critical eye to the problem/solution.

If a solution is found and solves the problem, the team heads up to the box on the top left.

But I explained that very often the solution is unknown. In that case think about having the teams do a “technical terrain walk.” This is the process of describing the problem to multiple sources (vendors, internal developers, other internal programs) debriefing on the sum of what was found. A terrain walk often discovers that the problem is actually a symptom of another problem or that the sources see it as a different version of the problem. Or that an existing solution already exists or can be modified to fit.

But often, no existing solution exists. In this case, teams could head to the box on the top right and build Minimal Viable Products – the smallest feature set to test with customers and partners. This MVP testing often results in new learnings from the customers, beneficiaries, and stakeholders –  for example, they may tell the topic developer that the first 20% of the deliverable is “good enough” or the problem has changed, or the timing has changed, or it needs to be compatible with something else, etc. Finally, when a solution is wanted by customers/beneficiaries/stakeholders and is technically feasible, then the teams move to the box on the top left.

The result of this would be teams rapidly iterating to deliver solutions wanted and needed by customers within the limited time the company had left.

Creative destruction
Those companies that make it do so with an integrated effort of inspired and visionary leadership, motivated people, innovative products, and relentless execution and passion.

Watching and listening to hundreds of people fighting the tsunami in a legendary company was humbling.

I hope they make it.

Lessons Learned

  • Creative destruction and disruption will happen to every company. How will you respond?
  • Topic action teams need to deeply understand the problems as the customer understands them, not just what the corporate strategy requirements dictate
    • This can’t be done without talking directly to the customers, internal stakeholders, and partners
  • Consider if the corporate strategy team should be more facilitators than gatekeepers
  • A light-weight way to keep topic teams in sync with corporate strategy is to offer a common innovation language and problem and solution framework

Filed under: Corporate/Gov't Innovation, Customer Development | 2 Comments »

Mapping the Unknown – The Ten Steps to Map Any Industry

Posted on September 20, 2022 by steve blank

A journey of a thousand miles begins with a single step

 Lǎozi 老子

I just had lunch with Shenwei, one of my ex-students who had just taken a job in a mid-sized consulting firm.  After a bit of catching up I offered he was looking a bit lost. “I just got handed a project to help our firm enter a new industry – semiconductors. They want me to map out the space so we can figure out where we can add value.

When I asked what they already knew about it, they tossed me a tall stack of industry and stock analyst reports, company names, web sites, blogs. I started reading through a bunch of it and I’m drowning in data but don’t know where to start. I feel like I don’t know a thing.”

I told Shenwei I was happy for him because he had just been handed an awesome learning opportunity – how to rapidly understand and then map any new market. He gave me a “easy for you to say” look, but before he could object I handed him a pen and a napkin and asked him to write down the names of companies and concepts he read about that have anything to do with the semiconductor business – in 30 seconds. He quickly came up with a list with 9 names/terms. (See Mapping – First Pass)

“Great, now we have a start. Now give me a few words that describe what they do, or mean, or what you don’t know about them.”

Don’t let the enormity of unknowns frighten you. Start with what you do know.

After a few minutes he came up with a napkin sketch that looked like the picture in Mapping – Second Pass. 
Now we had some progress.

I pointed out he now had a starter list that not only contained companies but the beginning of a map of the relationships between those companies. And while he had a few facts, others were hypotheses and concepts. And he had a ton of unanswered questions.

We spent the next 20 minutes deconstructing that sketch and mapping out the Second Pass list as a diagram (see Mapping – Third Pass.)

As you keep reading more materials, you’ll have more questions than facts. Your goal is to first turn the questions into testable hypotheses (guesses). Then see if you can find data that turns the hypotheses into facts. For a while the questions will start accumulating faster than the facts. That’s OK.

Note that even with just the sparse set of information Shenwei had, in the bottom right-hand corner of his third mapping pass, a relationship diagram of the semiconductor industry was beginning to emerge.

Drawing a diagram of the relationships of companies in an industry can help you deeply understand how the industry works and who the key players are. Start building one immediately. As you find you can’t fill in all the relationships, the gaps outlining what you need to learn will become immediately visible.

As the information fog was beginning to lift, I could see Shenwei’s confidence returning. I pointed out that he had a real advantage that his assignment was in a known industry with lots of available information. He quickly realized that he could keep adding information to the columns in the third mapping pass as he read through the reports and web sites.

Google and Google Scholar are your best friends. As you discover new information increase your search terms.

My suggestion was to use the diagram in the third mapping pass as the beginning of a wall chart – either physically (or virtually if he could keep it in all in his head). And every time he learned more about the industry to update the relationship diagram of the industry and its segments. (When he pointed out that there were existing diagrams of the semiconductor industry he could copy, I suggested that he ignore them. The goal was for him to understand the industry well enough that he could draw his own map ab initio – from the beginning. And if he did so, he might create a much better one.)

When lunch was over Shenwei asked if it was OK if he checked in with me as he learned new things and I agreed. What he didn’t know was that this was only the first step in a ten-step industry mapping process.

Epilog

Over the next few weeks Shenwei shared what he had learned and sent me his increasingly refined and updated industry relationship map. (The 4th  mapping pass showed up 48 hours later.)In exchange I shared with him the news that he was on step one of a ten step industry mapping program. Other the next few weeks he quickly built on the industry map to answer questions 2 through 10 below.

Two weeks later he handed his leadership an industry report that covered the ten steps below and contained a sophisticated industry diagram he created from scratch. A far cry from his original napkin sketch!

Six months later his work on this project convinced his company that there was a large opportunity in the semiconductor space, and they started a new practice with him in it. His work won him the “best new employee” award.

The Ten Steps to Map any Industry

Start by continuously refining your understanding of the industry by diagramming it. List all the new words you encounter and create a glossary in your own words. Start collecting the best sources of information you’ve read.

Basic Industry Understanding

  1. Diagram the industry and its segments
    1. Start with anything
    2. Build your learning by successive iteration
    3. Who are the key suppliers to each segment?
    4. How does this industry feed into the larger economy?
  2. Create a glossary of industry unique terms
    1. Can you explain them to others? Are there analogies to other markets?
  3. Who are the industry experts in each segment? For the entire industry?
    1. Economic experts? E.g. industry analysts, universities, think tanks
    2. Technology experts? E.g. universities, think tanks
    3. Geographic experts?
  4. Key Conferences, blogs, web sites, etc.
    1. What are the best opensource data feeds?
    2. What are the best paid resources?
Overlay numbers, dollars, market share, Compound Annual Growth Rate (CAGR) on all parts of the industry diagram. That will inform velocity and direction of the market.

Detailed Industry Understanding

  1. Who are the market leaders? New entrants? In revenue, market share and growth rate
    1. In the U.S.
    2. Western countries
    3. China
  2. Understand the technology flows
    1. Who builds on top of who
    2. Who is critical versus who can be substituted
  3. Understand the economic flows
    1. Who buys from who in this industry
    2. Who buys the output from this industry.
    3. How cyclical is demand?
    4. What are the demand drivers?
    5. How do companies inside each segment get funded? Any differences in capital requirements? Ease of starting, etc.
  4. If applicable, understand the personnel flow for each segment
    1. Do people move just between their segments or up and down through the entire industry?
    2. Where do they get trained?
The beginner’s forecasting method is to simply extrapolate current growth rates forward. But in today’s technology markets, discontinuities are coming fast and furious. Are there other technologies from adjacent markets will impact this one? (e.g. AI, Quantum, High performance computing,…?). Are there other global or national economic initiatives that could change the shape of the market?

Forecasting

  1. What’s changed in the last 10 years? 5 years?
    1. Diagram the past incarnations of the industry
  2. What’s going to change in the next 5 years?
    1. Any big insight on disruption?
    2. New entrants?
    3. New technology?
    4. New foreign suppliers?
    5. Diagram your model of the industry in 5 years

Filed under: Customer Development | 7 Comments »

Save the Date! the 5th Lean Innovation Educators Summit

Posted on January 19, 2022 by steve blank

SAVE THE DATE for the 5th Lean Innovation Educators Summit on The Role of Educators and the University in Building Sustainable and Innovative Ecosystems 
February 3rd, 2022 from 1 to 4pm EST, 10 to 1pm PST 

Join me, Jerry Engel, Pete Newell, and Steve Weinstein as well as educators from universities around the world for this upcoming event.  

The Summit brings together leading entrepreneurship educators who are putting Lean Innovation to work in their classrooms, accelerators, and students’ ventures. This is the fifth edition of this semi-annual gathering, a supportive peer community of educators, and we’ll meet to discuss how we adapt to meet the challenges of the current tumultuous environment. The upcoming session will focus on the role of the university, and other important organizations in our ecosystems, in supporting our critical mission of preparing the next generation of entrepreneurs and innovators. 

Why?
The role of entrepreneurs and the ecosystem that supports them is even more important as the pace of change accelerates. The challenges of the pandemic and global warming highlight the importance of capturing value from technology and the innovators who create novel and effective solutions.  How do we as entrepreneurship and innovation educators best prepare the next generation?  What is the role of the university in helping us do this?

What?
Our key note speaker is Dr. Richard Lyons of UC Berkeley – the University’s first ever Chief Innovation Officer. After ten years as Dean of the Berkeley Haas School of Business, Rich brings a fresh and broad perspective. Stimulated by Professor Lyon’s keynote, we’ll get to the heart of the Summit, our peer to peer discussions. In these moderated sessions we’ll discuss best practices with colleagues from around the world. We’ll then share the results of the breakout sessions with everyone.

How?
This session is free but limited to Innovation educators. You can register for the event here and learn more on our website:  https://www.commonmission.us/summit. We look forward to gathering as a community to continue shaping the future of Lean Innovation Education.

Panelists and moderators include:  

Ivy Schultz – Columbia University
Victoria Larke – University of Toronto
Ali Hawks – BMNT
Julie Collins – Georgia Tech
Babu DasGupta – University of Wisconsin – Milwaukee
Bob Dorf – Columbia University
Michael Marasco – Northwestern University
Sabra Horne – BMNT
Phil Weilerstein – Venture Well
Tyrome Smith – Common Mission Project
Thomas O’Neal – University of Central Florida
Paul Fox – La Salle University
Philip Bouchard – TrustedPeer Entrepreneurship
Jim Hornthal – UC Berkeley
Todd Morrill – UC Berkeley
Todd Basche – BMNT
Dave Chapman – University College London
Stephanie Marrus – University of California – San Francisco
Sid Saleh – Colorado School of Mines
Joe Smith – Department of Defense
Jim Chung – George Washington University

When?

See you February 3rd, 2022 from 1 to 4pm EST, 10 to 1pm PST.
Register here

Filed under: Customer Development | 1 Comment »

Year End Review – What You Might Have Missed

Posted on December 30, 2021 by steve blank

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

Charles Dickens

What a year for all us. The quote above sums it up for me.

I thought I’d share an end of year summary of the best of the 2021 posts.  Enjoy.

Innovation in Large Organizations

  • The difference between creating new things versus executing existing ones in two sentences. Here
  • Why innovation heroes are the sign of a dysfunctional organization. The title says it all. Here.

Culture

  • Sometimes we get trapped inside our own heads. I know I did. Here’s how to get unstuck. Here
  • We all don’t see the world the same way. And I don’t mean politics. Some of us literally can’t see what you can.  Here.

Entrepreneurship

  • Why are you waiting for permission to get smarter? You don’t need permission. Here.
  • Ever wonder how a class you took gets designed? There’s a lot under the hood. Here’s how.

National Security

  • U.S. national security problems are multiplying faster than our traditional institutions can solve. So we decided to create something different – The Gordian Knot Center for National Security Innovation.  Here.

Happy Holidays.

On to a better year.

steve

Filed under: Customer Development | 1 Comment »

How to Find a Market? Use Jobs-To-Be-Done as the Front End of Customer Discovery

Posted on November 4, 2021 by steve blank

Modern entrepreneurship began at the turn of the 21st century with the observation that startups aren’t smaller versions of large companies – large companies at their core execute known business models, while startups search for scalable business models. Lean Methodology consists of three tools designed for entrepreneurs building new ventures:

These tools tell you how to rapidly find product/market fit inside a market, and how to pivot when your hypotheses are incorrect. However, they don’t help you figure out where to start the search for your new business.

Anthony Ulwick and Ted Thayer of Strategyn have a set of unique and valuable insights:

  • Rather than defining markets as existing, adjacent or new markets – or by verticals, technology, demographics, et al. all markets can be described by what job the user wants to get done
  • Their Jobs-to-be-Done Market Definition Canvas make the Lean Startup methodology even better by finding and defining a market up front. Here’s their description of why and how.

Problem – Lean Doesn’t Have a Market Definition Step
The Lean Startup methodology asks innovators to interview potential customers within their “market” to discover the customer’s unmet needs and establish a product/market fit. Given the number of interviews to get meaningful data, this can take months.

As innovators deepen their understanding of the customer, they may pivot their product concept, target a different vertical, demographic, or customer activity, or incorporate a different technology into their solution.

Some innovators define markets around a product, e.g. the vacuum cleaner market or the espresso maker market. Others define markets around verticals, e.g. the financial services market or the healthcare market. Or defined around demographics (the people over 45 market), technologies (the brain sensor market), customer activities (the fitness market), and product portfolios (the heavy equipment market).

Here’s the consequence: Depending on how founders originally define their market, making one or more of these changes can inadvertently alter the original market definition, which in turn changes the “market” they are targeting and invalidates the customer needs they have captured.

This creates a recursive process in which the team is simultaneously iterating on the market definition, customer needs, and the value proposition, with no logical way to exit. This circular loop can cause them to churn, pivot, and fail.

Startups would have a greater chance of success if founders could avoid iterating the market they are targeting while at the same time trying to establish product/market fit.

In most cases, innovators don’t create markets; they create products to serve markets. Thus, the market must be defined and validated in the innovation equation before moving to needs discovery and product definition.

What’s Missing?
What missing is a process for defining a market that reduces uncertainty, reduces iteration in the effort to establish a product/market fit, and aligns the team around the business objectives and the results.

We’ve spent a good number of years asking ourselves what constitutes the “perfect” market definition. What we have concluded is that a market should be defined in such a way that…

  • The market definition becomes a constant in the product/market fit equation, not a variable. It does not change as the study of that market unfolds.
  • It is stable over time. It does not go away when different solutions or technologies come along, thus making it a valid long-term focal point for value creation.
  • It is unique from any other market, making it distinguishable and unambiguous.
  • It does not assume a product or a solution. Rather, it is defined in problem space.
  • It indicates who the targets are for value creation—making it clear which group of people to focus on.
  • It makes the discovery of customer needs quicker, more effective, and less costly.
  • It reveals all sources of competition, making disruption and other surprises less likely.
  • It is relevant to and aligns the entire organization, e.g., sales, marketing, development, etc.

Given this set of characteristics, how should a market be defined?

How should a market be defined?
It’s worth remembering that people buy products and services to get a “job” done. A job is defined as a task people are trying to accomplish, a goal or objective they are trying to achieve, a problem they are trying to resolve, something they are trying to avoid, or anything else they are trying to accomplish. More about Jobs-to-be-Done Theory here.

When looking at a market through the Jobs-to-be-Done lens, a market is best defined as: a group of people and the job they are trying to get done.

For example, parents (a group of people) who are trying to “pass on life lessons to children” (a job-to-be-done) constitute a market. As do surgeons (a group of people) who are trying to “repair a torn rotator cuff” (a job-to-be-done), or clinicians (a group of people) who are trying to “diagnose the cause of a patient’s sleep disorder” (a job-to-be-done).

When defining markets with a jobs-to-be-done lens, thousands of unique markets exist. They are stable over time, focus on what people are trying to accomplish rather than solutions, offer a focal point for analysis, and form a foundation for deeply understanding customer needs. Learn about needs through this lens here.

Because the market is defined using “Jobs-to-be-Done” before engaging in the first step of the Lean Startup methodology, the defined market will not change as customer discovery and validation of that market unfolds. This cuts back on the number of iterations and pivots.

Big idea – Even New and Disruptive Markets can all be viewed as “Jobs-to-be-Done”
How does “Jobs-to-be-Done” work in new and disruptive markets? For example, people often talk about the cryptocurrency market as a new market, but is it really? It depends how you define “market.”

If you choose to define a market around a new product or a new technology, then, by definition, the “cryptocurrency market” would be considered new. But if you define the same market through a jobs-to-be-done lens, the story is very different, as consumers (a group of people) have for centuries been trying to intermediate the storage and exchange of value over time (the job-to-be-done).

When looking through a jobs-to-be-done lens, cryptocurrency is simply a new offering in a pre-existing market. Similarly, Uber, Netflix, electronic evidence discovery, cloud computing, smartphones, online learning, Airbnb, Spotify, Google Maps and many other products considered disruptions are in fact new offerings in pre-existing markets.

Why does this matter? When conducting needs discovery, potential customers struggle to articulate needs for a product that does not yet exist. But when you ask them about their job-to-be-done, customers can state with precision their needs associated with getting the job done better, making needs discovery faster and more effective.

To help you define your market through this lens, we have created the Jobs-to-be-Done Market Definition Canvas. We want to make this canvas available to everyone who has embraced the Lean Startup methodology and want to take it to the next level.

Instructions for using the canvas are included below, and the canvas can be downloaded here.

THE JOBS-TO-BE-DONE MARKET DEFINITION CANVAS

If you can’t see the canvas click here.

The Jobs-to-be-Done Market Definition Canvas is designed to help you define the market you are in or have chosen to serve as [a group of people] + [the job they are trying to get done].

The Market Definition Canvas works for both B2C and B2B applications. While it is optimized to define single-sided markets, it can be used twice to define both sides of a double-sided market. For component manufacturers who sell to OEMs or who are at the top of a long distribution chain, a canvas can be completed for each constituent in the distribution chain, including the end-user, as each constituent has its own unique job to get done.

See this webinar with Tony Ulwick to learn more about this canvas.

8 steps to define Jobs to Be Done

1. Start with a traditional market definition

What is the product/service/idea you seek to innovate?
The exercise starts with something you’re familiar with—a product focus. We ask, “What is the product, service, or idea you’re looking to innovate around?” We use this as the grounding point, as the subsequent steps will help transition you from a product view to a jobs-to-be-done view of your market.

2. Job executor determination

Who’s using the product to get a job done?
The focus on “jobs to be done” begins with this step. Ask, who’s using your product (or who would use your product once released) to get a job done? The goal is to reveal the diverse set of potential product users. So, list all the categories of people who use or would use the product to extract its value. Keep in mind; we are focused here on the job executors. Do not list out influencers, economic buyers, people who support the product throughout its lifecycle, or other customer types, just job executors.

For example, Bosch used this approach when trying to enter the North American circular saw market (yes, they began with a product-based market definition in mind). They concluded that finish carpenters, framers, roofers, general contractors, electricians, and plumbers use circular saws. Notice they did not use the formal job titles of the job executors; instead, they listed the categories of people who use circular saws.

3. Abstracted job executor

What overarching term can classify all the categories of people using the product to get a job done?
Next, define the one overarching term that can be used to classify or describe all people using, or potentially using, your product these people as a single group. Remember, we are defining a market as a group of people + the job-to-be-done. When defining the group of people, try not to use an actual job title. Instead, look for an all-inclusive term that encapsulates all job executors, usually a higher-level, generic term.

The Bosch team, for example, abstracted roofers, framers, plumbers, finish carpenters, etc., into a higher-level category using the term “tradespeople.” In other words, the “group of people” using circular saws was conveniently referred to as tradespeople.

For consumer product goods, the job executors are often referred to simply as “consumers.”

4. Job executor

The group of people (job executor) is defined as:
You may have come up with more than one way to describe the “group of people.” Choose a label that fits all types of people using the product, service, or idea you have in mind. For example, you may choose the term surgeons over cardiac surgeons, or tradespeople over tradesmen to be more inclusive. Other examples include educators over teachers, accountants over tax preparers, or consumers over adults.

It is important to define the “group of people” before defining the job-to-be-done, as you will be interviewing representatives of the group to determine, from them alone, the way they define the job they are trying to get done.

5. Function of the product

What “job” does the product/service/idea you want to innovate help the job executor accomplish?
Products don’t have jobs-to-be-done; people do. But to uncover the targeted group’s job-to-be-done, it is often helpful to start by understanding what function/job the product you have in mind performs.

Work with your product team, or preferably use customer discovery to go directly to the “group” of people (defined in step 4) and ask: What does/will the product or service we have in mind help you accomplish from a functional perspective? Collect and cull the responses into a single statement according to this formula:

The product will help the group of people [verb] + [object of the verb] + [contextual clarifier (optional)].

For example, a kettle may be used to “heat + water + to the desired temperature,” or a dental drill may be used to “contour + the shape + of a tooth.”

Keep in mind; this isn’t the customer’s job-to-be-done—it’s the function or the job that the product gets done, which is often only part of the job the customer is trying to get done. For example, while people may use a kettle to “heat water to the desired temperature,” the overall job they are trying to get done may be to “prepare a hot beverage for consumption.”

The goal of the market definition canvas is to help innovators uncover the job-to-be-done as perceived by the customer, not the product developer.

6. Other products used and their functions

What other products do people use in conjunction with the product?
What “job” does each of the other products get done?To get a feel for the entire job your customer is trying to get done, ask them what other products they use immediately before, while, and immediately after using your product/service.

For example, when tradespeople use a circular saw to “cut wood,” what other products are they using in conjunction with a circular saw? Perhaps they are also using a T-square, a measuring tape, sandpaper, and (or) a pencil.

List the products they use in conjunction with the one you have in mind.

Next, document the functions / jobs that each of these other products gets done for the group of people. Use the same format used previously: [verb] + [object of the verb] + [contextual clarifier (optional)].

The Bosch team, for example, determined through customer interviews that while the function of the circular saw was to “cut wood” (a job statement), that tradespeople were using a T-square to ensure they “make a cut in a straight line” (a job statement), and that they were using a pencil to “mark the cut path” (a job statement).

7. Abstracted job statement

When looking at the market through the job executor’s eyes, what core functional job do they say they are trying to get done?
Putting all the pieces together helps reveal the customer’s ultimate job-to-be-done at the right level of abstraction. Assume your product is getting part of a job done. Assume people are using these other products to complete the entire job-to-be-done.

You want to define your customer’s job-to-be-done in a way that includes your product’s function (job) and rationalizes why customers are using all these other products as they cobble together a complete solution. The Bosch team, for example, determined that tradespeople are using a circular saw along with other products so they can “cut wood in a straight line” (the abstracted job statement).

A financial services firm determined that accountants use tax preparation software in conjunction with other products so they can “formulate and execute a tax strategy for a client” (the abstracted job statement).

Defining the market at this level of abstraction allows you to evolve your product over time to help customers get more, and eventually all, of their job done—preferably before competitors do. It offers the innovator a built-in path and vision for growth—tied directly to what customers are trying to accomplish.

Remember, complete steps 5-8 employing customer interviews. Make sure you encapsulate the job of the product you have in mind in the abstracted job statement. If the job of the product is not represented, you have abstracted the job statement to too high a level. Preventing you from capturing customer need statements that will help inform the improvement of the product you have in mind.

8. Customer’s Job-to-be-Done

Now that you have your customer’s job, you can document that job in this box. If you have multiple versions of the job statement, work with job executors to gain consensus on the best version.

With this, the Market Definition Canvas is completed, and your market is defined for you through a jobs-to-be-done lens. Your market = Group of people (Step 4) + Job-to-be-Done (Step 8)

Now you can iterate quickly during your lean innovation process—and more reliably succeed in your market.

To learn more about Jobs Theory and Outcome-Driven Innovation, check out the following resources:

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