Marketing | Steve Blank

When Microsoft Threatened to Sue Us Over the Letter “E”

Posted on August 20, 2012 by steveblank

By 1997 E.piphany was a fast growing startup with customers, revenue and something approaching a repeatable business model. Somewhere that year we decided to professionalize our logo (you should have seen the first one.) With a massive leap of creativity we decided that it should it should have our company name and the letter “E” with a swoop over it.

1997 was also that year that Microsoft was in the middle of the browser wars with Netscape. Microsoft had just released Internet Explorer 3 which for the first time was a credible contender. With the browser came a Microsoft logo. And with that same massive leap of creativity Microsoft decided that their logo would have their product name and the letter “E’ with a swoop over it.

One of E.piphany’s product innovations was that we used this new fangled invention called the browser and we ran on both Netscape and Microsoft’s. We didn’t think twice about.

That is until the day we got a letter from Microsoft’s legal department claiming similarity and potential confusion between our two logos.

They demanded we change ours.

I wish I still had their letter. I’m sure it was both impressive and amusing.

I had forgotten all about incident this until this week when Doug Camplejohn, E.piphany’s then VP of Marketing somehow had saved what he claims was my response to Microsoft’s legal threat and sent it me. It read:

Response Letter to Bill Gates

Dear Bill,

We are in receipt of your lawyer’s letter claiming Microsoft’s
ownership of the look and feel of the letter “e”. While I understand
Microsoft’s proprietary interest in protecting its software, I did not
realize (until the receipt of your ominous legal missive) that one of
the 26 letters in the English language was now the trademarked
property of Microsoft.

Given the name of your company, claiming the letter “e” is an unusual
place to start. I can understand Microsoft wanting exclusive rights to
the letter “M” or “W”, but “e”? I can even imagine a close family
member starting your alphabet collection by buying you the letters “B”
or “G” as a birthday present. Even the letters “F” “T” or “C” must be
more appealing right now then starting with “e”.

In fact, considering Microsoft’s financial health and legal prowess
you may want to consider buying a symbol rather than a letter.
Imagine the value of charging royalties on the use of the dollar “$”
sign.

I understand the legal complaint refers to the similarities of our use
of “e” in the Epiphany corporate logo to the “e” in the Internet
Explorer logo. Given that the name of my company and the name of your
product both start with the same letter, it doesn’t take much
imagination to figure out why we both used the letter in our logos,
but I guess it has escaped your lawyers.

As to confusion between the two products, it is hard for me to
understand why someone would confuse a $250,000 enterprise software
package (with which we require a customer to buy $50,000 of Microsoft
software; NT, SQL Server and IIS), with the free and ever present
Internet Explorer.

Given that Microsoft sets the standard for most things in the computer
industry, I hope we don’t open the mail next week and find Netscape
suing us for using the letter “N”, quickly followed by Sun’s claim on
“J”. Perhaps we can submit all 26 letters to some sort of standards
committee for arbitration.

Come to think of it, starting with “e” is another brilliant Microsoft
strategy. It is the most common letter in the English language.

Steve Blank

Epilogue
Given later that year Microsoft ended up being a large multi-million dollar E.piphany customer all I can assume is that cooler heads prevailed (more than likely our new CEO,) and this letter was never sent and the threatened lawsuit never materialized.

Ironically, since the turn of the century Microsoft has done great things for entrepreneurs. Their BizSpark and DreamSpark programs have become the best corporate model of how a large company can successfully partner with startups and students worldwide.

But I am glad we helped keep the letter E in the public domain.

Filed under: E.piphany, Marketing | 18 Comments »

At times not losing is as important as winning

Posted on August 17, 2012 by steveblank

At times not losing is as important as winning.

Customer Validation
E.piphany was an 11-month-old startup with 31 people and on fire. We had closed four $100,000 deals for our customer relationship management software.

Joe Dinucci, our VP of Sales, was hot on the trail of our next big order. He had just demo’d our product to his friend, the CFO of Autodesk. After seeing the demo, the CFO walked Joe over to the office of Autodesk’s VP of sales, and said to her, “I think this product might solve your sales reporting problem.”

After a demo she agreed it would.

Joe came back to our company excited. If we won the Autodesk account it could be worth half a million dollars or more.

They Have A Problem and Know It
At the time Autodesk’s sales organization was frustrated with their IT department. It took weeks or months for Sales to get financial, sales results and customer reports from IT. Autodesk’s VP of Sales fit the profile of a earlyvangelist: she understood she had a pressing problem (couldn’t get timely data needed to forecast sales), she was searching for a solution (beating up the Autodesk CIO on a weekly basis to solve her problem), she had a timetable for a solution (now) and her company had committed budget dollars to solve this problem (they spend anything to stop missing forecasts.)

A Match Made in Heaven
For the next several weeks, the entire E.piphany engineering department worked with Autodesk’s sales operation team to build a prototype using real Autodesk data. Joe made a compelling ROI (Return On Investment) presentation to the VP of Sales and the CFO. E.piphany and Autodesk seemed like a match made in heaven and it looked like we had a $500,000 deal that could close in weeks.

Not quite.

The CIO
The CFO casually mentioned that as IT would install and maintain the system, they would have to recommend and sign off on an E.piphany purchase. As the CIO worked for the CFO, Joe paid what he thought was a courtesy call on Autodesk’s CIO.

The CIO didn’t say much in the presentation (warning, warning) and he passed Joe on to his manager of data warehouse development. What Joe didn’t know was that months ago, this IT group has been tasked to solve Sales’ reporting problems and was struggling with the complexity and difficulty of extracting data from SAP.

Joe was aware of the tense history between Autodesk sales and its IT department, but given how happy the VP of Sales was with E.piphany’s prototypes plus Joe’s personal relationship with the CFO, he didn’t see this as a serious obstacle. Joe believed the IT organization had nothing but technical piece parts to compete with E.piphany’s complete solution. Given E.piphany had a vastly superior solution, Joe believed there was no logical way they could recommend to the CIO to deploy anything else but E.piphany.

Wrong.

The IT Revolt
Unbeknownst to Joe a revolt was brewing in Autodesk’s IT organization. “Sales keeps asking for all these reports and now they are telling us what application to buy? If we deploy E.piphany’s entire solution, we’ll all be out of jobs. But if we recommend software tools from another startup, we could say we’re solving the needs of the Sales VP and still keep our jobs.“

Late in the afternoon, Joe got a call from a friend in Autodesk’s IT department warning that they were give the order to another startup. And the CIO would approve the recommendation and pass this to his boss, the CFO, the next day.

We’re Going to Lose
Joe arrived in my office, his face making it clear he brought bad news. E.piphany was now about to lose a half million-dollar Autodesk sale. Joe looked at his shoes while he muttered his frustrations with internal Autodesk politics.

We had a long discussion about the consequences if we lost. It was one thing for a startup to lose to a large company like Oracle or IBM. But to lose the sale to another startup with an inferior product would have been psychologically devastating to our little startup. E.piphany’s product development team had spent weeks inside the account, and they believed the deal was all but won. The competitor would trumpet the sales win far and wide and use the momentum to get more sales.

We couldn’t afford to lose this sale. What could we do?

The Third Way
It struck me that there might be more than two outcomes.Sales had defined the problem as a win or lose situation. But what if we added a third choice? What if we formally, publicly and noisily withdrew from the account? The worst case was that we could tell our engineering team that we should have won but the game was rigged. While we certainly wouldn’t win the business, withdrawing would solve the more emotionally explosive issue of losing. (And In the back of my mind, I believed this third way had a chance of giving us the winning hand.)

At first Joe hated the idea. Like every great sales guy, he was eternally optimistic about the outcome. However, I wasn’t in the mood to put the company’s future at risk on the testosterone levels of our sales guy. Withdrawing by claiming that Autodesk’s IT staff had already decided that it was “any solution but ours” was making the best of a deteriorating sales situation.

Joe called his friend the CFO, waiting until after 5pm, when he was sure he wasn’t in his office, and left him a message: “Thanks for introducing us to the VP of Sales and your technical staff. We really appreciate the opportunity to work with you. Unfortunately it looks like this deal isn’t going to happen. You have a bunch of smart guys working for you, but they are determined to make sure that the status quo won’t change. We have limited resources and can’t continue to give demos and hold meetings when the outcome is predetermined. My guess is we’ll be back in six to nine months when the VP of Sales is still unhappy. I’m going to call her and let her know that we can’t put in the system that she wanted, but I thought I’d check-in with you first. Thanks again for the opportunity.”

The “Take Away” Gambit
This is known as the “take-away” gambit. I believed that by pulling the deal away, there was at least a 50% chance the CFO would do what I knew he didn’t want to – go to his CIO and help him make the “right” decision. I understood that a potential downside consequence of this maneuver was an uncooperative IT organization when we tried to install the product, but by then their check would be in the bank, and I had a plan to win them over.

Joe was concerned that we had just lost the account, but he made the call and left the message.

Two hours later Joe got a call back from the CFO who said,, “Wait, wait! Don’t pull out. Why don’t you come up and meet with me tomorrow morning. I’ve chatted with my staff and we’re now ready for a contract proposal.”

Autodesk became our third paying customer. Over the next year they paid us over $1million for our software.

After a full-court charm offensive, the IT person who wanted anyone but us became our biggest advocate. She keynoted our first user conference.

Lessons Learned

In complex B-to-B sales, multiple “Yes” votes are required to get an order.

A single “No” can kill the deal.

Understanding the saboteurs in a complex sale is as important as understanding the recommenders and influencers

We needed a selling strategy that took all of this into account.

In a startup not losing is sometimes more important than winning.

Filed under: Customer Development, E.piphany, Marketing | 23 Comments »

Unrequited Love

Posted on July 24, 2012 by steveblank

If there’s only one passionate party in a relationship it’s unrequited love.

Here’s how I learned it the hard way.

The Dartmouth Football Team
After Rocket Science I took some time off and consulted for the very VC’s who lost lots of money on the company. The VC’s suggested I should spend a day at Onyx Software, an early pioneer in Sales Automation in Seattle.

In my first meeting with Onyx I was a bit nonplussed when the management team started trickling into their boardroom. Their VP of Sales was about 6’ 3” and seemed to be almost as wide. Next two more of their execs walked in each looking about 6’ 5” and it seemed they had to turn sideways to get through the door. They all looked like they could have gotten jobs as bouncers at a nightclub. I remember thinking, there’s no way their CEO can be any taller – he’s probably 5’ 2”. Wrong. Brent Frei, the Onyx CEO walks in and he looked about 6’ 8’ and something told me he could tear telephone books in half.
I jokingly said, “If the software business doesn’t work out you guys got a pretty good football team here.” Without missing a beat Brent said, “Nah, we already did that. We were the Dartmouth football team front defensive three.” Oh.

But that wasn’t the only surprise of the day. While I thought I was consulting, Onyx was actually trying to recruit me as their VP of Marketing. At the end of the day I came away thinking it was a smart and aggressive team, thought the world of Brent Frei as a CEO and knew Onyx was going to succeed – despite their Microsoft monoculture. With an unexpected job offer in-hand I spent the plane flight home concluding that our family had already planted roots too deep to move to Seattle.

But in that one day I had learned a lot about sales automation that would shape my thinking when we founded Epiphany.

I Know A Great Customer
A year later my co-founders and I had formed Epiphany. As other startups were quickly automating all the department of large corporations (SAP-manufacturing, Oracle-finance, Siebel and Onyx-Sales) our first thought was that our company was going to automate enterprise-marketing departments. And along with that first customer hypothesis I had the brilliant hypothesis that my channel partner should be Onyx. I thought, “If they already selling to the sales department Epiphany’s products could easily be cross-sold to the marketing department.”

So I called on my friends at Onyx and got on a plane to Seattle. They were growing quickly and doing all they could to keep up with their own sales but they were kind enough to hear me out. I outlined how our two products could be technically integrated together, how they could make much more money selling both and why it was a great deal for both companies. They had lots of objections but I turned on the sales charm and by the end of the meeting had “convinced them” to let us integrate both our systems to see what the result was. I made the deal painless by telling them that we would do the work for free because when they saw the result they’d love it and agree to resell our product. I left with enough code so our engineers could get started immediately.

Bad idea. But I didn’t realize that at the time.

It’s Only a Month of Work
Back at Epiphany I convinced my co-founders that integrating the two systems was worth the effort and they dove in. Onyx gave us an engineering contact and he helped our team make sense of their system. One of the Onyx product managers got engaged and became an enthusiastic earlyvanglist. The integration effort probably used up a calendar month of our engineering time and an few hours of theirs. But when it was done the integrated system was awesome. No one had anything like this. We shipped a complete server up to Onyx (this is long before the cloud) and they assured us they would start evaluating it.

A week goes by and there’s radio silence – nothing is heard from them. Another week, still no news. In fact, no one is returning our calls at all. Finally I decide to get on a plane and see what has happened to our “deal.”

Instead of being welcomed by the whole Onyx exec staff, this time a clearly uncomfortable product manager met me. “Well how do like our integrated system?” I asked. “And by the way where is it? Do you have it your demo room showing it to potential customers?” I had a bad feeling when he wouldn’t make eye contact. Without saying a word he walked me over to a closet in the hallway. He opened the door and pointed to our server sitting forlornly in the corner, unplugged. I was speechless. “I’m really sorry” he barely whispered. “I tried to convince everyone.” Now a decade and a half later the sight of server literally sitting next to the brooms, mops and buckets is still seared into my brain.

I had poured everything into making this work and my dreams had been relegated to the janitors closet. My heart was broken. I managed to sputter out, “Why aren’t you working on integrating our systems?

Just then their VP of Sales came by and gently pulled me into a conference room letting a pretty stressed product manager exhale. “Steve, you did a great sales job on us. We really were true believers when you were in our conference room. But when you left we concluded over the last month that this is your business not ours. We’re just running as hard and fast as we can to make ours succeed.”

Unrequited Love
I realized that mistake wasn’t my vision. Nor was it my passion for the idea. Or convincing Onyx that it was a great idea. And besides not being able to tell me straight out, Onyx did nothing wrong. My mistake was pretty simple – when I left their board room a month earlier I was the only one who had an active commitment and obligation to make the deal successful. It may seem like a simple tactical mistake, but it in fact it was fatal. They put none of their resources in the project – no real engineering commitment, no dollars, no orders, no joint customer calls.

It had been a one-way relationship the day I had left their building.

It would be 15 years before I would make this mistake again.

Lessons Learned

When you don’t charge for something people don’t value it

When your “partners” aren’t putting up proportional value it’s not a relationship

Cheerleading earlyvangelists are critical but ultimately you need to be in constant communication with people with authority (to sign checks, to do a deal, to commit resources, etc.)

Your reality distortion field may hinder your ability to realize that you’re the only one marching in the parade

If there’s only one passionate party in a deal it’s unrequited love

Filed under: Customer Development, E.piphany, Marketing | 36 Comments »

Bonfire of the Vanities

Posted on August 5, 2011 by steveblank

When I was in my 20’s, I was taught the relationship between marketing and sales over a bonfire.

—

Over thirty years ago, before the arrival of the personal computer, there were desktop computers called office workstations. Designed around the first generation of microprocessors, these computers ran business applications like word processing, spreadsheets, and accounting. They were an improvement over the dumb terminals hanging off of mainframes and minicomputers, but ran proprietary operating systems and software. My third startup, Convergent Technologies (extra credit for identifying the photo on page 2) was in the business of making these workstations.

The OEM Business
Convergent’s computers were bought and then resold by other computer manufacturers – all of them long gone: Burroughs, Prime, Monroe Data Systems, ADP, Mohawk, Gould, NCR, 4-Phase, AT&T. Convergent had assembled a stellar team with founders from Digital Equipment Corporation and Intel and engineers from Xerox PARC. And once we went public, we hired a veteran VP of Sales from Honeywell.

As the company’s revenues skyrocketed, Convergent started a new division to make a multi-processor Unix-based mini-computer. I had joined the company as the product marketing manager and now found myself as the VP of marketing for this new division. We were a startup inside a $200 million company. A marketer for 5 years, I thought I knew everything and proceeded to write the data sheets for our new computer.

Since this new computer was very complicated – it was a pioneer in multi-processing– I concluded it needed an equally detailed data sheet. In fact, when I was done, the datasheet describing our new computer, proudly called the MegaFrame, was 16 pages long. I fact-checked the datasheet with my boss (who would be my co-founder at Epiphany) and the rest of the engineering team. We all agreed it was perfect. We’d left no stone unturned in answering every possible question anyone could ever have about our system. As we typically did, I printed up several thousand to send out to the sales force.

The day the datasheets came back from the printers, I sent the boxes to the sales department in Convergent’s corporate headquarters, a separate building across the highway, and sent a copy to our CEO and the new VP of Sales. (I was thinking it was such a masterpiece I might get an “attaboy” or at least a “wow, thanks for doing all the hard work for our sales organization.”)

So when I got a call from the VP of Sales who said, “Steve, just read your new datasheet. Why don’t you come over to corporate. We have a surprise for you,” I smugly thought, “They probably thought it was so good, I’m going to get a thank you or an award or maybe even a bonus.”

Fahrenheit 451
I got in my car to make the five minute drive over the freeway. Turning into the parking lot, I noticed smoke coming from the far end of the lawn. As I parked and walked closer I noticed a crowd of people around what seemed to be an impromptu campfire. “What the heck??” As an ex Sales and Marketing VP, our CEO had a Silicon Valley reputation for outrageous stunts so I wondered what it was this time - a spur-of-the-moment BBQ? A marshmallow roast?

Heading to a meeting with the VP of Sales, I almost walked past the crowd into the building until I heard the VP of Sales call me over to the fire. He was there with our CEO feeding things into the fire. In fact as I got closer, it looked like the campfire was being entirely fed by paper. “Here, toss these in,” they said as they handed me a stack of…

Oh, my g-d they’re burning my datasheets!!!

The Bonfire of the Vanities
I stood there stunned as I realized that my 16-page carefully constructed, brilliantly written, technically accurate datasheets were being destroyed en masse. I guess I was speechless for so long that the VP of Sales took pity on me and asked, “Steve, do you know we have a sales force?” I managed to stammer out, “Yes, of course.” He asked, “Do you know how much we pay them?” Again, I managed to answer, “A lot.” Then he got serious and started to explain what was going on. (In the meantime our CEO watched my reaction with a big grin on his face.) He said, “Steve, I’ve never seen such a perfect datasheet. It answers every possible question a prospective customer could have about our product. The problem is that our computer sells for $150,000. No one is going to buy it from the datasheet. In fact, reading these, the only thing your datasheet will do is give a prospective customer a reason for saying “no” before our salespeople ever get to talk to them.

“Do you mean you want a datasheet with less information?!” I asked, not at all sure that I was hearing him correctly. “Yes, exactly. Your job in marketing is to get customers interested enough to engage our sales force, to ask for more information or better, to set up a meeting. No one is going to buy our computer from a datasheet, but they will from a salesman.”

Marketing to Match the Channel
It took me a few weeks to get over the lesson, but it stuck. When selling a physical product through direct sales, Marketing’s job is to drive end user demand into the sales channel. Marketing creates a series of marketing activities at each stage of the sales funnel to generate awareness, then interest, then consideration and finally purchase.

Ironically, over the last decade, I’ve seen web startups have the opposite problem. For web sites with an ecommerce component, the site itself is supposed to both create demand and close the sale. Web designers have to do the work of both the marketing and the sales departments.

Lessons Learned

Marketing materials need to match the channel

Marketings job in direct sales channels with consultative sales need to drive demand to the salesforce

Indirect channels require marketing material with more information than a direct channel

Web sites that sell products combine sales and marketing

Confusing these can get you your own bonfire

Filed under: Convergent Technologies, Marketing | 18 Comments »

Why Pioneers Have Arrows In Their Backs

Posted on October 4, 2010 by steveblank

First-Mover Advantage is an idea that just won’t die. I hear it from every class of students, and each time I try to put a stake through its heart.

Here’s one more attempt in trying to explain why confusing testosterone with strategy is a bad idea.

First mover advantage – great bad idea
The phrase “first mover advantage” was first popularized in a 1988 paper by a Stanford Business School professor, David Montgomery, and his co-author, Marvin Lieberman.[1]

This one phrase became the theoretical underpinning of the out-of-control spending of startups during the dot-com bubble. Over time the idea that winners in new markets are the ones who have been the first (not just early) entrants into their categories became unchallenged conventional wisdom in Silicon Valley. The only problem is that it’s simply not true.

The irony is that in a retrospective paper ten years later (1998), [2] the authors backed off from their claims. By then it was too late. Using this idea to differentiate themselves as the hot new Silicon Valley VCs, some of his former business school students made this phrase their rallying cry. Soon every other VC was using the phrase to justify the reckless “get big fast” strategies of dot-com startups during the Internet Bubble.

Fast Followers – a better idea
In fact, a 1993 paper by Peter N. Golder and Gerard J. Tellis had a much more accurate description of what happens to startup companies entering new markets.[3] In their analysis Golder and Tellis found almost half of the market pioneers (First Movers) in their sample of 500 brands in 50 product categories failed. Even worse, the survivors’ mean market share was lower than found in other studies. Further, their study shows early market leaders (Fast Followers) have much greater long-term success; those in their sample entered the market an average of thirteen years later than the pioneers. What’s directly relevant from their work is a hierarchy showing what being first actually means for startups entering new or resegmented markets:

*Innovator*	First to develop or patent an idea
*Product Pioneer*	First to have a working model
*First Mover*	First to sell the product	47% failure rate
*Fast Follower*	Entered early but not first	8% failure rate

The Race to Fail First
What this means is that first mover advantage (in the sense of literally trying to be the first one on a shelf or with a press release) is not real, and the race to be the first company into a new market can be destructive. Therefore, startups whose mantra is “we have to be first to market” usually lose. What startups lose sight of is there are very few cases where a second, third, or even tenth entrant cannot become a profitable or even dominant player. (The rules are different in the life-sciences arena.)

Ford vs. GM, Overture vs. Google
For example, Ford was the first successfully mass produced car in the United States. In 1921, Ford sold 900,000 Model Ts for 60 percent market share compared to General Motors 61,000 Chevys, a 6 percent market share. Over the next ten years, while Ford focused on cost reductions, General Motors built a diverse and differentiated product line. By 1931 GM had 31% of the market to Ford’s 28%, a lead it has never relinquished. Just to make the point that markets are never static, Toyota, a company that sold its first car designed for the US market in 1964, is poised to surpass GM as the leader in the US market. The issue is not being first to market, but understanding the type of market your company is going to enter.

If the car business is too removed from high tech as an example, how about the story of Overture. In 1998 Goto.com, a small startup (later Overture, now part of Yahoo!), created the pay per click search engine and advertising system and demo’d it at the TED conference.

It was not until October 2000 that Google offered its version of a pay per click advertising system -AdWords -allowing advertisers to create text ads for placement on the Google search engine.

Google is a $25 billion dollar company with most of its revenue from AdWords.

Overture was acquired by Yahoo for $1.6 billion.

Implicit Customer Discovery and Validation in Fast Followers
Why do fast followers win more often? It’s pretty simple. First Movers tend to launch without really fully understanding customer problems or the product features that solve those problems. They guess at their business model and then do premature, loud and aggressive Public Relations hype and early company launches and quickly burn through their cash.. This is a great strategy if there’s a bubble occuring in your market or you are going to bet it all on flipping your company for a sale. Otherwise the jury is in. There’s no advantage. [4]

Astute fast-followers recognize that part of Customer Discovery is learning from the first-mover by looking at the arrows in their backs. Then avoiding them.

Lessons Learned

Believing in First Mover Advantage implies you understand your business model, customers problems and the features needed to solve those problems.

That’s unlikely.

Therefore you’re either going to burn through your cash or pray that the hype can help you can flip your company.

None of the market leaders in technology were the first movers

[1] Montgomery, M. Lieberman.1988 “First Mover Advantage.” Strategic Management Journal, Volume 9, Issue S1, pages 41–58, Summer 1988.

[2] Montgomery, M. Lieberman “First-mover (dis)advantages: retrospective and link with the resource-based view.” Strategic Management Journal Volume 19, Issue 12, pages 1111–1125, December 1998

[3] P. N. Golder and G. J. Tellis. 1993. “Pioneer Advantage: Marketing Logic or Marketing Legend?” Journal of Marketing Research, 30(2):158–170.

[4] Did First-Mover Advantage Survive the Dot-Com Crash? . M. Lieberman 2007

Filed under: Customer Development, Market Types, Marketing | 46 Comments »

Turning on your Reality Distortion Field

Posted on April 22, 2010 by steveblank

I was catching up over coffee and a muffin with a student I hadn’t seen for years who’s now CEO of his own struggling startup. As I listened to him present the problems of matching lithium-ion battery packs to EV powertrains and direct drive motors, I realized that he had a built a product for a segment of the electric vehicle market that possibly could put his company on the right side of a major industry discontinuity.

But he was explaining it like it was his PhD dissertation defense.

Our product is really complicated
After hearing more details about the features of the product (I think he was heading to the level of Quantum electrodynamics) I asked if he could explain to me why I should care. His response was to describe even more features. When I called for a time-out the reaction was one I hear a lot. “Our product is really complicated I need to tell you all about it so you get it.”

I told him I disagreed and pointed out that anyone can make a complicated idea sound complicated. The art is making it sound simple, compelling and inevitable.

Turning on your Reality Distortion Field
The ability to deliver a persuasive elevator pitch and follow it up with a substantive presentation is the difference between a funded entrepreneur and those having coffee complaining that they’re out of cash. It’s a litmus test of how you will behave in front of customers, employees and investors.

30-seconds
The common wisdom is that you need to be able to describe your product/company in 30-seconds. The 30 second elevator pitch is such a common euphemism that people forget its not about the time, it’s about the impact and the objective. The goal is not to pack in every technical detail about the product. You don’t even need to mention the product. The objective is to get the listener to stop whatever they had planned to do next and instead say, “Tell me more.”

How do you put together a 30-second pitch?

Envision how the world will be different five years after people started using your product. Tell me. Explain to me why it’s a logical conclusion. Quickly show me that it’s possible. And do this in less than 100 words.

The CEOs reaction over his half- finished muffin was, “An elevator pitch is hype. I’m not a sales guy I’m an engineer.”

The reality is that if you are going to be a founding CEO, investors want to understand that you have a vision big enough to address a major opportunity and an investment. Potential employees need to understand your vision of the future to decide whether against all other choices they will join you. Customers need to stop being satisfied with the status quo and queue up for whatever you are going to deliver. Your elevator pitch is a proxy for all of these things.

While my ex student had been describing the detailed architecture of middleware of electric vehicles I realized what I wanted to understand was how this company was going to change the world.

All he had to say was, “The electric vehicle business is like the automobile business in 1898. We’re on the cusp of a major transformation. If you believe electric vehicles are going to have a significant share of the truck business in 10 years, we are going to be on the right side of the fault zone. The heart of these vehicles will be a powertrain controller and propulsion system. We’ve designed, built and installed them. Every electric truck will have to have a product like ours.”

75 words.

That would have been enough to have me say, “Tell me more.”

Lessons Learned

Complex products need a simple summary

Tell me why I should quit my job to join you

Tell me why I should invest in you rather than the line outside my door

Tell me why I should buy from you rather than the existing suppliers

Do it in 100 words or less.

Filed under: Marketing | 20 Comments »

Building a Company with Customer Data – Why Metrics Are Not Enough

Posted on December 17, 2009 by steveblank

Gathering real-world feedback from customers is a core concept of Customer Development as well as the Lean Startup. But what information to collect?

Only 57 Questions
Yesterday I got an email from an ex-student lamenting that only 2% of their selected early testers responded to their on-line survey. The survey said in part:

The survey has 57 questions, the last three of which are open ended, and should take about 20 minutes to complete. Please note that you must complete the entire survey once you begin. You cannot stop along the way and have your responses to that point saved.

If it wasn’t so sad it would be funny. I called the founder and noted that there are SAT tests that are shorter than the survey. When I asked him if he actually had personally left the building and talked to these potential customers, or even had gotten them on the phone, he sounded confused. “We’re a web startup, all our customers are on the web. Why can’t I just get them to give me the answers I need this way?”

Continual Data Flow
Customer Development suggests that founders have continual and timely customer, channel and market information.

Founders need three views of information to truly understand what is going on:

First-hand knowledge
A “birds-eye” view
The view from the eyes of customers and competitors

First-hand knowledge
First-hand knowledge is “getting outside the building” and talking to potential or actual customers. Customer Development proposes that the best way to get customer data is through personal observation and experience—getting out from behind your desk and getting up close and personal with customers, competitors, and the market.

Web startups are at real disadvantage here as founders may confuse web metrics, A/B testing and on-line surveys as the entirety of first-hand knowledge – for most web business models they are not. In fact, this mistake can be a “going out of business” strategy. Metrics tell you that something is happening. A/B testing can tell you that one something is better than another. But neither can tell you why. And getting answers back from customers only with on-line surveys when you can’t watch their pupils dilate or hear the intonation of their voice is not something I’d build a business on.

Of course you need to collect metrics, do A/B testing and run online surveys. It’s just that without having founders “get outside the building”, you are missing a key point of Customer Development – the numeric data you collect may be blinding you to the fact that you’re more than likely working to optimize the wrong business model. Customer needs are non-deterministic.

“Birds-eye view”
The second picture founders need is a synthesized “birds-eye view” of the customer, market and competitive environment. You assemble this view by gathering information from a variety of sources: web sites, social media (Facebook, Twitter, blogs, et al) sales data, win/loss information, market research data (i.e. compete.com, Alexa, etc.,) competitive analyses, and so on. From this big-picture view, founders try to make sense of the shape of the market and the overall patterns in the unfolding competitive and customer situation. At the same time, they can gauge how well industry data and the actual sales match the company’s revenue and market-share expectations.

(Just remember that most market research firms are excellent at predicting the past. If they could predict the future, they’d be entrepreneurs.)

My test for how well you understand this “order of battle” is to hand the founder a marker, have them go up to the whiteboard and diagram the players in the market and where they fit. (Try it.)

See through the eyes of customers and competitors
The third view is of the action as seen through the eyes of customers and competitors. Put yourself in your customers’ and competitors’ shoes in order to deduce possible competitors’ moves and anticipate customer needs. In an existing market this is where you ask yourself, “If I were my own competitor and had its resources, what would my next move be?” In looking through the eyes of a customer, the question might be, “Why should I buy from this company versus the incumbent.” In a new or resegmented market, the questions might be “Why would more than a few early adopters use this app, web site or buy this product? How would I get my 90-year grandmother to understand and buy this product?”

Think of this technique as playing chess. You need to be looking at all the likely moves from both sides of the chessboard. What would we do if we were our competitors? How would we react? What would we be planning? After a while this type of role playing will become an integral part of everyone’s thinking and planning.

Putting it All Together
First-hand knowledge is clearly the most detailed and essential, but offers a narrow field of view. Founders who focus only on this information risk losing sight of the big picture.

The “birds-eye view” provides a view of the market but lacks the critical detail. Founders who focus only on this image risk missing the “ground truth.”

Seeing through the eyes of customers and competitors is a theoretical exercise limited by the fact that you can never be sure what your customers and competitors are up to.

The combination of all three views helps founders form an accurate picture of what is going on in their business and help them hone in on product/market fit.

Even with information from all three views, founders need to remember there will never be enough information to make a perfect decision.

Building an Information Culture
The most important element of data gathering is what to do with the information once you collect it. Customer information dissemination is a cornerstone of Lean and agile companies. This information, whether good or bad, must not be guarded like some precious commodity. Large company cultures reward executives who hoard knowledge or suppress bad news. In any of my companies, that is a firing offense.

All news, but especially bad news, needs to be shared, dissected, understood, and acted upon.

This means that understanding poor click-through rates, retention numbers and sales losses are more important than understanding sales wins; understanding why a competitor’s products are better is more important than rationalizing ways in which yours is still superior. Winning startups build a startup culture that reward not punish messengers of bad news.

Lessons Learned

Three views of information: First-hand knowledge, “birds-eye” view, view from the eyes of customers and competitors

Web startups can fall into the trap of confusing metrics, testing and surveys with Customer Interaction.

Goal is to build an information culture to help you get to product/market fit.

Filed under: Customer Development Manifesto, Marketing | 22 Comments »

Ardent War Story 4: You Know You’re Getting Close to Your Customers When They Offer You a Job

Posted on October 15, 2009 by steveblank

In 1985 Ardent Computer was determined to create a market niche for personal supercomputers. To understand our potential markets, we started by analyzing the marketing literature from Cray Research then crisscrossed the country talking to prospective customers – scientists and researchers in advanced corporate R&D centers and universities – to understand their needs.

A week might start with a visit to the MIT Media Lab, the next day at Princeton in the Aerospace Engineering department, then off to General Motors’ advanced research group, across to the computer science department at the University of Illinois, up to Minneapolis to meet with ETA, Control Data and Cray, and across the country to Seattle to speak with Boeing’s advanced propulsion group before returning to to the geophysics department at Stanford.

Simulation applications
After six months, we hypothesized that our most likely customers were scientists and engineers who used one of five applications: computational fluid dynamics, finite element analysis, computational chemistry and seismic data processing and reservoir simulation.

At Boeing we had learned aircraft designers needed to calculate the airflow and turbulence around wings and engines. Instead of building a new wing to test designs, numerical simulation would allow them to use a supercomputer to build a virtual model of a wing on the screen and use an application called computational fluid dynamics to watch the resulting airflow without ever flying a plane. If they didn’t like what they saw (say the wing had more drag than expected), they could change the design and rerun the simulation.

At General Motors we heard from mechanical engineers who needed to calculate the strength, breaking point and failure modes of structures – everything from piston rods to bumpers. Their interest was easy to understand. Before computer simulation, they would test real objects until they physically broke (or get sued when something important broke, blew up, or collapsed.) Now applications called finite element analysis could calculate these stresses and failure modes on a computer screen.

A third simulation market, this one new and just emerging, allowed biologists to examine how drugs would interact by simulating them on a computer. A precursor to today’s biotech revolution, these computational chemistry applications allowed the active docking sites of potential drugs to be modeled and tested on a computer screen rather than in a test tube.

Finally, we could see that petroleum engineers at oil companies like Chevron and Exxon were using computers in exploration and extraction with seismic data processing and reservoir simulation, applications which were moving oil companies into the supercomputer age.

Traveling around the country had helped me begin to understand how these customers currently did their work, what journals they read, where they got their funding, what other software they ran on their machines, etc. I came back to the company and described the day-in-the-life of each type of customer.

This was one of the happiest times in my life as a marketer. I had known nothing about supercomputers and numerical simulation applications; now there wasn’t a day that went by that I wasn’t learning something new. As I traveled to some of the most arcane trade shows and conferences (AIAA, SPE, MSC, etc.), my hotel room was stacked with the journals and textbooks about each vertical market just to keep up with the people we were meeting. (I was a marketer, not an engineer and most of the fine points were way over my head – and probably not just the fine points. But reading their literature allowed me to discuss the problems and opportunities with customers.)

My Velvet Painting Period

You Know You’re Getting Close to Your Customers When They Offer You a Job
I believed that good marketers used their own products. I got facile enough with a few of the applications that I could even run some of them myself. I could build simple finite element models with Patran and set up a run of the Nastran analysis codes.

Later on in the company’s life I went to give a lunch-time seminar to Chevron’s La Habra research center on the use of graphics supercomputers in petroleum applications. I spoke about the state of the art in computational reservoir simulation and what could be accomplished using finite difference and finite element methods on the new class of machines that were coming from companies like ours. During the question and answer session my heart was in my throat since like any good marketer, my depth of knowledge was no more than one level away from being a complete idiot. At the end of the talk the head of the research facility came up to me and said, “That was a great talk. We’re glad your company hired a real petroleum engineer to come speak to us. We hate when the sales and marketing types come down and try to get us to buy something.”

For one of the few times in my life I was at a loss for words, and I was completely unprepared for what came next. “Here’s my card, if you ever want to consider a career in Chevron research. We’d be happy to talk to you.”

Marketing was really fun.

Lessons learned:

To sell to customers you need to understand them: how they work, what they do and what problem you will solve for them.

You can’t understand customers from inside your building.

Filed under: Ardent, Customer Development, Marketing, Vertical Markets | 7 Comments »

Ask and It Shall be Given

Posted on July 27, 2009 by steveblank

Once I recovered from burnout at Zilog, I was working less and accomplishing more. I even had time to find a girlfriend who was a contractor to the company. One of her first comments was, “I didn’t know you even worked here. Where were you hiding?” If she only knew.

What’s the Worst that Can Happen?
Our small training department had been without a manager for months and finding a replacement didn’t seem to be high on the VP of Sales list. We four instructors would grumble and complain to one another about our lack of leadership. Then it hit me – no one else wanted to be manager – what was the worst that could happen? I walked into the VP of Sales’ office and with my knees trembling, I politely asked for the job. I still remember him chuckling as I nervously babbled on what I good job I would do, what I would change for the better in the department, why I was qualified, etc. He said, “you know I figured it would be you to come in here and ask for the job. I was wondering how long it would take you.” I was now manager of Training and Education at Zilog.

All I had to do was ask.

Zilog Correspondence Course Matchbook

From that day forward, in my business and personal relationships, I would calculate the consequences of a “No” for an answer against the benefits of getting a “Yes.” The math said that it was almost always worth asking for what you want. And the odds in your favor are even higher, as most of your peers wouldn’t even get into the game due to some unspoken belief that in a meritocracy, good things will come to those who wait. Perhaps if you have a union job based on seniority, but not in any startup I’ve ever seen.

For entrepreneurs good things come to those who ask.

What’s Marketing?
As part of the sales organization, I thought I kind of figured out what the function of the sales department was. (In reality it would be another 20 years.) And I understood engineering since I interacted with them almost daily. And since Zilog still had a semiconductor fab next door, I learned what manufacturing did in a chip company, as every training class wanted to see their chips being made. But the one group that had me stumped was something called “marketing.” ”Explain it to me again,” I’d ask.

After a year and a half of running training and teaching the new Z-8000 and its peripheral chips, I began to figure out that one of the jobs of marketing was to translate what engineering built into a description that our salesmen could use to talk to potential customers. I distinctly remember this is the first time I head the phrases “features and benefits.” And since I saw our ads (but didn’t quite understand them,) I knew marketing was the group that designed them, somehow to get customers to think our products were better than Intel and Motorola’s.

But Intel was kicking our rear.

One day I heard there was an opening in the marketing department for a product marketing manager for the Z-8000 peripheral chips. The department had hired a recruiter and was interviewing candidates from other chip companies. I looked at the job spec and under “candidate requirements” it listed everything I didn’t have: MBA,
5-10 years product marketing experience, blah, blah.

I asked for the job.

The response was at first less than enthusiastic. I certainly didn’t fit their profile. However, I pointed out that while I didn’t have any of the traditional qualifications I knew the product as well as anyone. I had been teaching Z8000 design to customers for the last year and a half. I also knew our customers. I understand how our products were being used and why we won design-in’s over Intel or Motorola. And finally, I had a great working relationship with our engineers who designed the chips. I pointed out it that it would take someone else 6 months to a year to learn what I already knew – and I was already in the building.

A week later Zilog had a new product marketing manager, and I had my first job in marketing.

Now all I needed to do was to learn what a marketeer was supposed to do.

MBA or Domain Expert
Years later when I was running marketing departments I came up with a heuristic that replicated my own hire: in a technology company it’s usually better to train a domain expert to become a marketer than to train an MBA to become a domain expert. While MBA’s have a ton of useful skills, what they don’t have is what most marketing departments lack – customer insight. I found that having a senior marketer responsible for business strategy surrounded by ex-engineers and domain experts makes one heck of a powerful marketing department.

Entreprenuers Know How to Ask
Successful entrepreneurs have the ability to ask for things relentlessly. In the face of rules that stand in their way they find a way to change the rules. (To an entrepreneur comments like, “you need an MBA, we don’t fund companies like yours, we don’t buy from start-ups, you have to go through our vendor selection committee” are just the beginning of a negotiation rather than the end.) Entrepreneurs are fearless, persistent and uninhibited about asking – whether it’s asking to assemble a team, get financing, sell customers, etc. or whatever is necessary to build a company. If you are on the path to be a successful entrepreneur, hopefully you are already asking for things you want/need/aspire to. If not, don’t wait. Get started asking. It is a skill you need to either have or develop.

Lessons Learned

Ask, and it shall be given you; seek, and you shall find; knock, and it will be opened to you.

King James Bible, New Testament – Matthew 7:7

Filed under: Marketing, Technology, Zilog | Tagged: Entrepreneurs, Steve Blank | 21 Comments »

Rocket Science 4: The Press is Our Best Product

Posted on July 13, 2009 by steveblank

At Rocket Science while my partner Peter was managing the tools and game development, I was managing everything else. Which at this stage of the company was marketing and financing.

Our “Hollywood meets Silicon Valley” story played great in Silicon Valley, they ate it up in Hollywood, and the business press tripped over themselves to talk to us. The story had universal appeal, and we spun the tale and keep the buzz going. It worked. Judging by the ink we had gotten, we were the hottest company in the game business, with stories in Fortune, Forbes, Variety, The Hollywood Reporter, and the cover of Wired magazine. Yet we hadn’t shipped a single product.

While it felt wonderful at the time, this was a very bad idea.

Everyone Else is an Idiot
The theme of our press blitz was all about how we were going to show the old tired game companies the right way to make video games. Our press infuriated the established companies who had spent years building games that sold well, but had zero press recognition. (They all accurately predicted our demise because of our lack of game expertise.) Ah, the arrogance of inexperience. Fortunately I’ve never been good at lying, to be effective in communicating a story I truly had to believe in what I was saying. At the time I was a true believer that Rocket Science was going to change the gaming world. The positive effect of the tidal wave of press was as a door opener for us to raise money from corporate partners. Companies in the entertainment business around the world knew who we were, and were interested in meeting us, if only to see what the hype was about. Our VP of Business Development had no problems getting meetings and fund raising was easy.

The Digital Dream Team
Way before the Internet phenomenon, we had created “Rocket Science the brand” that was much bigger in size and importance than Rocket Science the company. One magazine called us the “Digital Dream Team”, young, edgy and hip, and by the looks of the company (great building, nice furniture, and well dressed 20-year olds) we were trying to live up to the reputation. All this activity occurring before we actually shipped a product. We were larger than life, but as one potential investor told us, “You guys are all hat and no cattle.”

Believing Your Own BS is Toxic
Lots of noise and smoke before a product ships seems to be a toxic byproduct of enthusiastic entrepreneurs. Every generation of new technology seems to find a willing audience in naïve journalists and eager readers. However, when the smoke clears the surviving companies are more than likely the ones that focussed on execution, not on creating a cacophony of press releases. If Rocket Science wasn’t a clear enough lesson in the danger of premature enthusiasm, the dot-com bubble that followed should have been. The only difference between us and the Internet bubble that would follow was that we did branding on the cheap by creating our image with public relations, whilethe dot-bomb era was to do it by spending enormous sums on advertising (those large venture rounds had to get spent somewhere.)

Hindsight is wonderful. For years the one solace I was able to take from the Rocket Science debacle was that I had got the branding right. Then I watched the criminally expensive dot-bomb-bust branding activities to see how futile and wasteful it was to brand a company before it has shipped products.

To a Hammer Everything Looks Like a Nail
In hindsight my failure was that I executed to my strength – telling a compelling story – without actually listening to customer feedback.

It wasn’t that I didn’t know how to listen to customers. It wasn’t that I didn’t have a smart VP of Marketing who was getting early feedback from customers and screaming that the games didn’t match the hype. It’s that as CEO I was too busy talking to the press and raising money to hear customer comments directly.

I had outsourced customer feedback and ignored the input. In fact, hearing input that contradicted the story I was telling created cognitive dissonance. So while the words may have passed through my ears I couldn’t “hear” it. Not being able to hear negative customer input is an extremely bad idea.

Out of the Ashes
A few of the key tenets of Customer Development, came from the ashes. The Customer Discovery lessons of “get outside the building and test your hypothesis with customers,” and “the founders need to hear the results,” came from this debacle.

The Customer Validation lesson of, “no formal launch until you have early sales validating the product and sales process” was also born here. Given the lukewarm feedback we were getting from potential customers and channel buyers we should have dramatically dialed back the hype until the follow-on games could match it. Given the talented people we had, there’s no doubt they would have done so. Instead the huge mismatch between expectations and reality of our first games diminished the brand and demoralized the company – we never recovered.

Lessons Learned

PR is not a product- it is a demand creation activity to fill a sales channel

The product needs to come close to the hype

Fire the CEO who insists on press and PR before they understand customer feedback

Branding is a process that should happen after you have customers

Filed under: Customer Development, Marketing, Rocket Science Games | Tagged: Early Stage Startup, Steve Blank, Tips for Startups | 10 Comments »

Rocks in the Rocket Science Lobby

Posted on June 1, 2009 by steveblank

In 1994 Rocket Science Games was the only video game company with a rock in its lobby.

We had moved our game development facilities from Berkeley and Palo Alto and consolidated into one building on Townsend Street in the “South of Market” neighborhood in San Francisco. (We’re were just around the corner from the future home of SF Giants AT&T Baseball Park, which then was just a rubble-strewn parking lot in a sketchy neighborhood.)

Since we were the hip, new, edgy, “Hollywood meets Silicon Valley” video game company (more about “big hat, no cattle” startups in subsequent posts,) our office obviously had to match the image.

Our receptionists’ desk was built on the wing of a WWII P-51 fighter plane, and the rest of the office décor matched. All that is, except for our lobby, as our offices were on the 4^th floor. When you got off the elevator, you faced a non descript corporate-looking set of walls.

This was about the time Christies and Sotheby’s were starting to auction Soviet space program artifacts, and I was thinking that perhaps a spacesuit in the lobby would be appropriate given our name.

One day, out for a walk at lunch, enjoying one of my favorite activities – watching them tear down the Embarcadero freeway (San Francisco urban upgrade post 1989 earthquake,) – I realized I was looking at the answer.

And it was much, much better than a space suit.

A week later as our employees came up the elevator there was a Lucite case on a pedestal with a single grey rock, lit with a single spotlight, on a velvet pillow. In front of it was a brass plaque that read:

“Moon rock, Apollo 18, July 1973 – Copernicus Crater.”

For the next few years, people from all around South of Market would come by the Rocket Science Games lobby to see our moon rock. It added to the mystique of the company – which helped with raising money and getting press ink. Everyone agreed that having our own moon rock was way cool.

————————————

Postscript: In all that time, not a single person who admired the moon rock questioned its provenance or authenticity. A bit surprising considering the intersection between geekdom and space. Maybe it was just too much ancient history.

NASA’s moon missions ended at Apollo 17.

The rock was a piece of rubble from the Embarcadero Freeway.

————————————

Only over time would I realize it augured the future of the company.

Filed under: Marketing, Rocket Science Games | Tagged: Entrepreneurs, Steve Blank | 4 Comments »

Going to Trade Shows Like it Matters – Part 2

Posted on May 22, 2009 by steveblank

I wrote this “Going to Trade Shows Like it Matters” memo as a board member after I saw our company at a trade show. Part 1 of this post offered some suggestions on going to trade shows to generate awareness. This post offers suggestions if you are going to a trade show to generate leads.

Ignore This Post
The same caveat applies as in the first post; If you’re selling via the web, and trade shows seem hopelessly anachronistic, ignore this post. If you’re in markets that still exhibit at them (semiconductors, communications, enterprise software, etc.,) this may be a useful read.

————

To: Marketing Department
From: Steve
Subject: Going to Trade Shows Like it Matters

Generating Leads

Ownership
If your company is going to a show to generate leads, then sales owns the show. Marketing is at the trade show as a support organization. Marketing may be physically “staging” the booth, and may even it “man it,” but don’t be confused, this is the VP of Sales party. While one could argue that a trade show is just another demand creation activity akin to advertising or PR, trade shows are the closest eyeball-to-eyeball contact you’re company is going to have with customers, competitors and partners.

While the industry average says only 20% of show leads are followed up, that only happens in other companies, not yours. Going to a show to get leads is a sales function, if the leads aren’t followed up marketing won’t be supporting these kinds of trade shows out of their budgets. Period. This is worthy of an open and honest discussion with sales up front. Just as marketing needed sales agreement that it was worth going to shows to generate awareness, sales needs to commit to marketing that leads will be followed up.

The Goal
Remember your goal is to get qualified leads into the sales pipeline. You want to maximize the number of people who give you their contact information, and gather enough information so a sales person can prioritize who to call first. This can’t happen unless you sit down with your sales team before the show and agree on who are the likely prospects. What companies should they booth team be looking for? What titles? Will there be a salesperson manning the booth so important prospects can talk to them immediately?

Promoting Your Presence
The best trade show planning will fail if nobody knows you’re there. Three-quarters of show attendees know what exhibits they want to see before they get to the show. Strong pre-show promotion will let your customers and prospects know about your exhibit. Are you twittering your appearance at the show? Did you create a Facebook page for the show? Are you buying Google adwords and adsense for the show? Direct email or snail mail to the pre-registered attendees is essential. Companies that don’t do this are the same ones who would have a party without sending out any invitations.

Many people arrive at a show with a schedule of what they want to see and have little or no time for other booths, so it’s important to get on that schedule. If sales is committed to the show, they will be contacting prospects and suspects reminding them you will be there. And inviting to the booth/dinner/private demo. While marketing can help, if sales isn’t fully engaged in this activity it’s a bad sign.

Follow-up as a Priority
While 80% of show leads aren’t followed up in other companies, it doesn’t happen in yours. Lead follow-up is your number one priority after a show, taking precedence over just about everything else — including catching up on what you missed while you were out of the office. Rank your leads by level of importance and interest, and base your post-show efforts on these priorities. Make sure that sales is emailing/ phoning/ texting the hottest prospects within a week after the show ends — the longer you let them sit, the staler they’ll become.

Send everyone else who gave you a lead some kind of follow-up email/paper mailing. Your post-show email or mailing can be as simple as a thank-you note or a brochure with a cover note. Write it before you leave for the show, so you can send the mailing immediately upon our return. Send PDF versions of brochures and product sheets as soon as you get back to the office. Have enough dead-tree brochures and product sheets on hand before the show so you can snail-mail out the information after you emailed it. You’d be surprised how effective sending a paper followup to a PDF can be.

Measurement
We measure everything. Particularly leads. It’s pretty simple. a) How many overall leads did you generate, b) how many leads ended up in the sales pipeline, and c) how many leads ever turned into an order.

To close the loop between leads and orders, always offer a sales commission bonus for orders that came from leads followed up from a show. It’s amazing how effective how a bonus can be. If leads from this show do not turn into orders, why are we going again next year?

General Comments for both Awareness and Lead Generation
Demo’s
I don’t care how small the booth or trade show is, do a canned demo every 20 to 30 minutes regardless of whether anyone is at your booth or not. The demo repeats the one or two key messages you decided were most important. Assume everything you’re showing will be seen by every one of your competitors, so this is not the place for showing the “secret new release.” You can do that in a private hotel suite for important prospects.

Demo’s are the heart of the booth. Without one, you’ll be having your booth staff standing in the aisles mournfully waiting for someone to walk up to them. Or worse, your salespeople will be talking to each other looking like they’re too busy to be interrupted. In both cases, that means you’re broadcasting “nothing interesting is in this booth folks, keep walking.” A continual demo lets you act like you have something important to share. Your sales people can gather the crowd, work the crowd and use their sales skills to see if prospects in the audience have interest. The difference between booths offering a demo and those without one is striking. One of them is a loser. It isn’t going to be your booth.

Competitive Analysis
Unless you are at the wrong show your competitors will be there as well. Someone from your company has to be designated the official competitive intelligence officer for this show. They are in charge of coordinating collection of competitive data, and preparing a summary report which contains facts as well as analysis. Get competitors literature, press packets from the press room, sit through their demos, and don’t come home until you know everything they’re saying. At the same time keep an eye out for competitors at your booth, (they may not be wearing their own company’s badges.) Welcome them loudly and openly. Put your arm around them and walk them around your booth. Make sure the staff is trained to never disparage a competitor. (Either at the show or anywhere else.)

Partnership Opportunities
At any show you are attending there has to be tons of opportunity for business to business relationships you hadn’t thought about. Everyone should have a chance to walk the floor looking for deals, technology, distribution, customers, etc. Someone from your company has to be designated the opportunity monitor, responsible for coordinating potential partner information and disseminating it in writing after the show.

No Literature at the Booth
Fancy brochures are expense, and most trade show literature ends up on the hotel room floor. Have sample literature under Lucite and chained to the booth. Take imprints of badges in exchange for paper literature requests. Each imprint is now a lead. (Keep a stash of literature for real live prospects under the table, but they should be pulling out their wallet to buy before you let go of it.)

Booth Staffing
You can’t do it alone. Even if it’s a small 10-foot booth you will need at least one person to “spot” you when you leave the booth to take a break or to check out the competition. For bigger booths a good rule of thumb is to have two to four staffers for every 100 square feet of exhibit space.

Even for the smallest trade show, no one shows up without booth training. (Messages, themes, demo’s. Everyone should be articulate and agile in describing and demoing the products.) And if you don’t show up for booth training, work somewhere else. (I’ve always visibly sent someone home from a tradeshow for missing training or booth duty. It makes the point and becomes company lore. You’ll never have to do it again.) Everyone should understand your goals, your messages, your demos and your theme and know their role. If your don’t have enough employees on the payroll, hire relatives, friends, or part-timers and train them.

Trade Show Post Mortem
Evaluate the experience.

Physical booth: What worked? What didn’t?
Demos/Equipment: What worked? What didn’t?
Messages/theme: What worked? What didn’t?
Staffing: What worked? What didn’t?

Write it down and keep it in a tradeshow handbook for those who will follow.

Go to trade shows like it matters.

Filed under: Customer Development, Marketing | Tagged: Customer Development, Early Stage Startup, Entrepreneurs, Steve Blank, Tips for Startups | 7 Comments »

Going to Trade Shows Like it Matters – Part 1

Posted on May 21, 2009 by steveblank

Ignore This Post
If you’re selling via the web and trade shows are something your grandfather told you about, ignore this post. If you’re in markets that still exhibit at them (semiconductors, communications, enterprise software, medical devices, etc.,) you know they’re expensive in time, dollars and resources.

I wrote this “Going to Trade Shows Like it Matters” memo as a board member after I saw our company at a trade show. My observation was that they had the “Going to Trade Shows” part down, they just needed to add the “Like it Matters.”

————

To: Marketing Department
From: Steve
Subject: Going to Trade Shows Like it Matters

Setting Clear Trade Show Objectives
There’s no use going to a show if you don’t know why. Answers like, “because our competitors are there,” or “because it’s on our calendar,” or even “because I think we should,” don’t cut it. (Remember your department has a mission.) There’s a plethora of reasons why a company would want to exhibit at a show:

write sales orders
generate leads for future sales
research the competition
spot trends
generate awareness and visibility within the industry
build our mailing list with quality names
find better or cheaper suppliers
build rapport with current customers
get press
generate excitement around a new product introduction
get additional partners
recruit staff

The problem with this list is that every company can find at least five things they like on it. For a small company this is like throwing your tradeshow money on the floor. A company must pick the one or two top goals or nothing useful will happen. The number one reason a small company is going to a tradeshow is to generate awareness. As the company gets larger and a large professional sales organization kicks in, its second priority is to generate qualified leads. This doesn’t mean that there aren’t tertiary goals, but they are just that – not the top one or two.

Before you go to a trade show sales and marketing need to agree to measurable goals. Everything you do before, during, and after the show should be evaluated in terms of whether it contributes toward reaching these goals. While marketing can decide they are going to the show to generate awareness, marketing can’t decide they are going to a show to generate leads – unless the VP of Sales says that they believe those leads will be valuable and sales has a plan to follow up on those leads.

If sales doesn’t think the show is worth going to for the leads, and marketing isn’t going to generate awareness, remind me – why are you going to this show?

Generating Awareness
Ownership
If your company is going to a show to a tradeshow to generate awareness, then marketing owns the show, and sales is there for support. Do not assign any sales people to the show who feel they “have something better to do,” 1) they might actually do (like closing an order) and, 2) bad sales attitudes are contagious.

Budget
A test for whether a show is worth going to generate awareness, is to total up the show budget. Then offer those budget dollars to the VP of Sales. They have a choice; they can tell you not to go to this show and they can use your show budget for anything they want in sales; or they can let you go to the show to use those dollars to create awareness for them. If the VP of Sales doesn’t think that generating end user awareness and ultimately demand for them is worthwhile, then one of you is an idiot. Hope it’s not you.

Once you know which show you’re going to and what your goals are, draw up a budget. Without a budget, costs can quickly spiral out of control (last minute impulse purchases to jazz up your booth, for example) and defeat your best laid plans. A rule of thumb is that your space costs represent about a quarter of your total show budget. So when you know what you’ll be paying for space rental, multiply it by four, for a rough idea of your expenses.

The Message
Sitting around a conference room table brainstorming messages that might resonate with customers, or worse having a PR agency doing that for you, is a firing offense in a small company. You should be brainstorming messages with current and potential customers. Your messages should have been pre-tested with prospects and existing customers way before you go to a show.

Say it Loud
Attendees are looking at hundreds of booths each screaming messages at them. Why are your messages going to stand out? Show-goers can’t sort through a pile of inarticulate or barely whispered thoughts. Pick just one or two key ideas that you want to get across at the show and train yourself and your staff to “stay on message”. Then that message needs to be translated into a theme for the booth, the staff and the show.

Then shout the messages out (virtually) at the top of your lungs. Visually, demo’s, wild colors, etc. If you think you are going to offend your customers or embarrass your engineering organization, get out of the marketing department. IBM doesn’t have to shout to get noticed, but you do. Design your graphics, pre-show promotion, literature and show directory advertising around your focused message and theme. However, scantly clad women, children and animals (in any combination) are still in bad taste.

Promotions attract booth traffic
Promotions and give-away’s drive traffic to your booth. Offer a free bestselling book in your industry (can you have the author there to autograph it?); Hold a contest, (If you’re giving away a big prize make sure your most valuable prospect wins.) Have a loud product demo; give away pieces of candy; hire a masseuse and offer free back rubs. While the promotion needs to fit your company’s image and the demeanor of the attendees, I’ll tell you that I’d be giving away dating-service T-shirts at the bereaved widows’ convention.

Location, location, location
A small booth is no excuse for being stuck in the corner. Don’t tell me “that’s where they put all the small booths.” I know that, so why do I need you? Get yourself into the booth selection meetings and get to know the manager. Call often and early and try to upgrade your location. Shoot for a high-traffic location. Be sure to look at a floor plan before you choose your site. Foot traffic is heaviest in certain areas of a typical trade show floor. Look for locations near entrances, food concessions, rest rooms, seminar rooms, or close to major exhibitors. Try to avoid dead-end aisles, loading docks, obstructing columns, or other low-traffic regions.

Partners Booths
While your booth may be small, some of your potential or existing partners may have much larger ones, in much more visible locations. Figure out how to get your equipment into every other big booth we can. But it has to come with one of your people to talk about the product. If you tell me we can’t find any established exhibitor whose products or services complement ours to let us in, I question why you are going to this show.

Tradeshow Seminars
Almost all tradeshows have conferences and seminar sessions; is your company keynoting any? Leading or speaking at any? No is the wrong answer. If there aren’t any that match your company, create some. You ought to know who the conference or seminar chairman is a year a head of time, and they certainly ought to know you. I can’t imagine your company going to a tradeshow to create awareness and not being a speaker. (That means neither can you.)

Preshow Publicity
Does your company have any new announcements to make at the show? Are you twittering your appearance at the show? Did you create a Facebook page for the show? Are you buying Google adwords and adsense for the show? Did you issue any press releases targeted at the trade publications and local papers that will be covering the show? Has the company talked to key industry analysts/press pre-show to ask them to stop by? Did the company send out direct mail (email or postcards) to potential or pre-registered attendees reminding them to stop by the booth? Do you have press kits for the show, (electronic and paper) and have you posted them on-line and dropped them by the physical and on-line press room?

Key Influencers
Does the company have press/industry analysts scheduled for demos? Does the company have demos or dinners/lunch scheduled for key industry influencers? Is the company hosting/co-sponsoring some event? Why not?

Customer Discovery
Sitting inside of your company you’ve made a whole bunch of assumptions about who your customers are and why they will buy. Now there are thousands of real live customers walking around the show floor with facts. You need to get those facts back inside our building. What are all the questions you’ve ever had about customers? What do they read? What other shows do they go to? How would they reach them? Have they ever heard of you? Do they believe your key messages? Do they believe the problem you are solving is important? Who would buy your product?

Measurement
How do you measure success at a tradeshow where the goal was generating awareness? Ask the potential customers who actually came to your booth and call them after the show. Take all the leads you got at the show (yes you are collecting leads even though you’re at the show to generate awareness) and follow up. Ask them what they thought of your company/product before/after the show. What message did they take away? Did this help them to understand your company/product

Part 2 of the memo, to be posted tomorrow: using a trade show to generate leads. Plus tips on overall trade show strategy.

Filed under: Customer Development, Marketing | Tagged: Customer Development, Early Stage Startup, Entrepreneurs, Steve Blank, Tips for Startups | 2 Comments »

SuperMac War Story 10: The Video Spigot

Posted on May 11, 2009 by steveblank

I was lucky to have been standing in the right place when video became part of the Macintosh. And I got to experience a type of customer buying behavior I had never seen before – the Novelty Effect. 74HGZA3MZ6SV

Present at the Creation
It was early 1991 and Apple’s software development team was hard at work on QuickTime, the first multimedia framework for a computer. At the time no one (including Apple) knew exactly what consumers were going to do with multimedia, it was still pre-Internet. But the team believed adding video as an integral part of an operating system and user experience (where there had only been text and still images) would be transformative.

But Apple had planned to announce and demo QuickTime without a way to get video into the Mac. They had this great architecture, and Apple had figured out to get movies into their own computers for a demo, but for the rest of us there was no physical device that allowed an average consumer to plug a video camera or VCR into and get video into a Mac.

A month or two before the QuickTime public announcement in May, the SuperMac hardware engineers (who had a great relationship with the QuickTime team at Apple) started a “skunk works” project. In less than a month they designed a low-cost video-capture board that plugged into the Mac and allowed you to connect a video camera and VCR. But to get video to fit and playback on the computers of the era, they needed to compress it. So SuperMac engineering also developed video compression software, called Cinepak. The software was idiot proof. There was nothing for the consumer to do. No settings, no buttons – plug your camera or VCR in and it just worked seamlessly. (The Cinepak codec was written by the engineer who would become my cofounder at Rocket Science Games.) It worked great on the slow CPUs at the time.

Something Profound
Engineering gave us a demo of the prototype board and software and asked, “Do you guys think we can sell a few of these boards?” Remember, this is the first time anyone outside of Apple or the broadcast industry had seen moving images on a Macintosh computer. (A company called Avid had introduced a $50,000 Mac-based professional broadcast video editing for two years earlier. But here was a $499 product that could let everyone use video.) Our engineers connected a VCR, pushed a button and poured in the video of the Apple 1984 commercial. We watched as it started playing video at 30 frames/second in a 320 x 240 window.

Up until that moment Quicktime had been an abstract software concept to me. But now, standing there, I realized how people felt when they saw the first flickering images in a movie theater. We must have made them play the demo twenty times. There were a few times in my career I knew at that moment I was watching something profound – (Holding the glass masks of the Z80 microprocessor. My first IPO at Convergent. First silicon of the MIPS RISC processor.) I stood there believing that video on computers was another – and equally as memorable.

Lets Sell it Like There’s No Tomorrow
When we all regained the power of speech, our reaction was unanimous, “What are you talking about – can we sell it? This is the first way to get video into a computer, we’re going to sell and market this board like there’s no tomorrow. Even though we won’t make a ton of money, it will be an ambassador for the rest of our product family. People who aren’t current customers of our graphics boards will get to know our company and brand. If we’re smart we’ll cross-sell them one of our other products. We might even sell a few thousand of these.”

Everyone laughed at such an absurd number.

The Video Spigot
“What are we going to call it?” Lets see…, it’s video input, … how about we call it the Video Spigot?”

Now, in hindsight, with a spigot, you’re actually pouring stuff out, and, in fact, the ad actually shows you stuff pouring stuff out, but into your Mac. It made no logical sense (a fact engineering reminded us about several times.) But it made the point that this device could pour video into your Mac and consumers instinctually got it.

Our CEO and our VP of manufacturing were incredibly nervous about manufacturing more than a few hundred of these boards. “There’s nothing to do with this product once you get the video in. You can’t manipulate it, you can’t do anything other than playback the video in QuickTime.” And they were right. (Remember there were no video applications available at all. None. This was day zero of consumer video on the Mac.)

Our answer was, “People will love this thing, as long as we don’t oversell the product.” We knew something our CEO didn’t. We had seen the reactions of people playing with the prototypes in our lab and when we demo’d it to our sales force. When we saw our salespeople actually trying to steal the early boards to take home and show their kids, we knew we had a winner. All we had to do was tell customers they could get video into their computer – and not promise anything else.

But the rest of the management team really skeptical. We kept saying, “Don’t worry, we’re going to sell thousands of these.” Little did we know.

We launched the product with this ad that said “Video Spigot, now pour video into your computer,” and this just hit a nerve.

We sold 50,000 Video Spigots in six months.

(As an aside, we saved money by putting my daughter in the ad. (That’s every marketeers excuse for putting their kids in an ad.) She’s in the little car on the monitor, and she’s also, if you look very carefully, in the water. We had that little car around the house for a while.)

They’re All Coming Back
So, manufacturing ramped up our factory, and as we’re selling 10,000 Video Spigots a month, our CEO is now concerned that maybe all these boards were all going to be returned to us because they didn’t really do anything once you got video into your computer. (A rational fear, as the sum of all of our other graphics boards shipped was about 7,500/month.)

Marketing knew who the Spigot customers were; we had all the registration cards and all the data. So we turned to our customers, surveying a few hundred people who had bought the product and asked:

Question: Were you the person who bought the board? Answer: Yes.
Question Are you happy with the board? Answer: Oh, it’s great.
Question Are you using the board? Answer: No.
Question And … wait a minute, you’re not using it anymore? Answer: No.
Question So do you want a refund? Answer: No, no.
Question Why not? Answer: It did everything you said. We loved this product.

It didn’t do anything else. People loved it, they used it, and they put it in their desk drawer.

We accidently had a product with the Novelty Effect.

The Novelty effect
I didn’t recognize the behavior at the time, but anyone who loves technology and gadgets has at one time or another has bought a technology toy – USB memory sticks, iPod Shuffles, umbrellas with LED lights, alarm clocks that talked, Flip Video Cameras, etc. – used them for a while and then stuck them in the drawer. The product does what it said it would, and amuses you for a while. You don’t regret the purchase price because you got entertained and then you lose interest - the Novelty Effect.

Unintended Consequences – Video Editing
As these boards are flying out the door, one of the software engineers at SuperMac got to thinking about what did you do with video once you did get it into a computer – so he wrote the first Quicktime-based video editor which we called ReelTime.

But you probably never heard of ReelTime. You may know it by its final name.

Since we had gotten out of the software business when we came out of Chapter 11, and our sales channel didn’t know what to do with software, we licensed ReelTime to Adobe. And, of course, Adobe said, “Oh, by the way, you don’t mind if the software engineer comes with us, do you?”

Adobe renamed ReelTime to Adobe Premiere. And Randy Ubillos, its author, went on to author Mac-based video editing software for the next 18 years. His team wrote what became FinalCut Pro at Macromedia; it was bought by Apple, and now he’s at Apple doing new versions of iMovie.

So an unintended consequence of the VideoSpigot, and to the benefit of video editors everywhere, video editing for the masses was invented at SuperMac.

Thanks to Bruce Leak and the Apple QuickTime team, Peter Barrett for Cinepak and Randy Ubillos for giving us video editing on the Mac. It was fun watching it happen.

Filed under: Customer Development, Marketing, SuperMac, Technology | Tagged: Steve Blank, SuperMac | 26 Comments »

Love/Hate Business Plan Competitions

Posted on May 7, 2009 by steveblank

I love business plan competitions.

I hate business plan competitions.

I Love Business Plan Competitions
I had a breakfast with a friend who has founded a few companies in Thailand and started the New Ventures Program at one of their universities. He was visiting Stanford and mentioned how proud he was that several of his Thai students were here in the States for a business plan competition. 74HGZA3MZ6SV

For those of you who don’t know, business plan competitions are held by universities who get their students to enter and compete to see who has the best business idea. Local venture investors and/or companies offer cash prizes for the winners. In exchange, these VCs/companies get early looks at new deal flow and offer aspiring entrepreneurs feedback and advice on their business plan.

These competitions started in the early 1980‘s at the University of Texas and have sprouted like mushrooms in the last 10 years. Just Google the term and you’ll be amazed. Almost every university, region and car wash now has a business plan competition; the rules, who can participate, how large the prizes and who are the judges vary by school.

Over scrambled eggs and diet coke, I listened to this seasoned startup veteran describe the excitement of his students who came to the U.S. to compete. I finally understood how valuable these contests can be for students in cities or countries without a venture capital or entrepreneurial infrastructure. At a university business plan competition, for the first time they can swim in the sea of expertise that we/I take for granted in the middle of Silicon Valley. Win, lose or draw, these students have a life changing experience where they can network and get smarter as they see what good startup thinking looks like.

I love business plan competitions (and with my valley-centric bias, I think Berkeley and Stanford have two of the best.) If you are outside of Silicon Valley, you ought to jump into them with both feet. You’ll learn a lot.

I Hate Business Plan Competitions
Yet this same conversation reminded me why every time students at Berkeley or Stanford tell me they’ve entered a technology business plan competition, I question whether they are wasting their time.

For all the reasons why business plan competitions are wonderful for students from outside the U.S., or even outside of Silicon Valley, I am left speechless when a student in a 50-mile radius of Sand Hill Road (who tells me they’re serious about starting a company) thinks their time is better spent entering one.

I have seen students spend well over a year refining a business plan competition pitch when they have could have gotten the same advice within a month by literally stepping out the door and aggressively pursuing it. And with the other 11 months, they could have been well into actually building a company.

In the real world, most business plans don’t survive the first few months of customer contact.

And even if they did – customers don’t ask to see your business plan.

Here’s a simple heuristic: if you are one of the lucky few who are within one- or two-degrees of separation of venture capital and startup resources (law firms, patent attorneys, etc.) and you are chasing a technical business plan competition, you are signaling that you really don’t want to start a company. (And that may be fine with you. Just don’t confuse the time you’re spending with actual progress in building a company.)

I hate business plan competitions – when they encourage students to write a “winning plan” rather than teaching them how to get out of the building and use locally available resources to start a company.

Filed under: Marketing, Technology, Venture Capital | Tagged: Early Stage Startup, Entrepreneurs, Steve Blank, Tips for Startups, Venture Capital | 16 Comments »

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When Microsoft Threatened to Sue Us Over the Letter “E”

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Building a Company with Customer Data – Why Metrics Are Not Enough

Ardent War Story 4: You Know You’re Getting Close to Your Customers When They Offer You a Job

Ask and It Shall be Given

Rocket Science 4: The Press is Our Best Product

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Going to Trade Shows Like it Matters – Part 2

Going to Trade Shows Like it Matters – Part 1

SuperMac War Story 10: The Video Spigot

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