At Ardent we assembled an amazing group of talented engineers to build personal supercomputers to sell to scientists and engineers. (Context here.) The company failed.
Getting Out of the Building Wasn’t Entertainment – Discovery and Validation
Now that I was the master of the “facts” about customer needs in these specialized vertical markets, and with my team of vertical marketers, I thought I had achieved absolution and redemption. Opinions had been eliminated as part of marketing’s dialog inside the company; we had achieved “fact nirvana.” But there was one fatal flaw. As I enjoyed my post-graduate vertical marketing education, I had forgotten the real purpose of spending time in the field.
While understanding how customer’s do their work was one key part of Customer Discovery, I neglected the other key component – Customer Validation – to understand whether there were sufficient number of customers who had a problem that needed to be solved – and would pay to solve it. I had needed to ask customers four simple questions.
- Did the customers know they had a problem?
- If so, did they want to change the way they were doing things to solve that problem?
- If so, how much would they pay to solve the problem?
- Would they write us a Purchase Order now before our supercomputer was even complete, to be the first to solve their problems?
In hindsight, these questions seem blindingly apparent yet not asking them led to the ultimate demise of Ardent. I just assumed that since customers were talking to me and spending time with me, it must mean that they agreed with our new company’s vision and would spend piles of money with us. At this point in my career I didn’t understand that the goal of getting outside the building was not only finding markets with potential customers to sell to but also confirming the company’s vision, business model and product/market fit.
I had done a good job of Customer Discovery but failed at Customer Validation.
Ignoring the Red Flags
While I had lots of people willing to talk to me, we never really pushed hard to see if any customers were willing to buy and pay for the product before it shipped.
Early startup customers are visionaries just like the founders selling to them. If your startup’s vision is compelling enough, these early customers want to buy into the dream of what could be, and they want to get in early. They will put up with an unfinished system that barely works to get a competitive advantage outside their company (or sometimes a political one inside their company.) They will count on your startup to listen to their needs for subsequent releases or follow-on systems that actually deliver on the initial promise.
All industries, markets and segments have these visionary, early adopters. It is one of the wonderful intersections between human nature, capitalism, and startups. Not finding a sufficient set of these early visionaries is the biggest red flag a company can encounter. Ignoring these warning signs is fatal.
Product/Market Fit
Getting out of the building is not to collect feature lists from prospective customers nor run tons of focus groups (I had passed this test.) Instead it was to validate the product/market fit by discovering if their were enough customers who would buy our product as spec’d. This was where I had failed at Ardent. Once we had found our target customers we spent our meetings describing our new personal supercomputer and what it could do for these researchers instead of listening and truly understanding whether what we were offering was a “nice to have it” or “got to have it.”
If I had had actually been asking “Were we solving a problem these scientists and engineers felt they had?” I would have gotten a half-hearted “maybe.” If I had followed that up with a “If our personal supercomputer delivers as promised, would you write me a check now, before it ships?” I would have seen that no one was falling over themselves to be the first to buy our product. Another clue: lots of people said, “We’d try it if you give it to us.” That answer is always a dead give-away that you don’t yet have a product compelling enough to build a business.
As often happens in a startup, we confused our own vision and passion with the passion of our potential customers.
I had talked too much and listened too little.
What did the company do when we heard customer input that contradicted our business plan and assumptions? More in the next post.
Lessons learned:
- We had “discovered” Ardent’s initial markets and customers
- We spent too much time selling our vision and not enough time validating whether customers would actually buy
- A lack of early, eager purchasers is a red-flag – time to revisit your business model
