Consultants can help startups leverage their limited resources. But startups can shoot themselves in the foot when founders use consultants at the wrong time or in the wrong way. Here’s why.
Your Process Doesn’t Work
A friend of mine asked me to chat with a startup he’d invested in. “They’re deep into Customer Development,” he said. I waited for the shoe to drop – and it did, as he continued carefully, “But they don’t seem to be making much progress. I think your process doesn’t work.”
So I met the entrepreneur and asked him how his search for a business model was going. “Great, but we’re having a bit of a problem getting traction.” (Anytime I hear an entrepreneur talking in euphemisms, I get nervous.) After a bit more discussion, I discovered the “problem in getting traction” meant revenue was zero.
“We’re in Customer Validation but we can’t seem to close a deal.” Hmm, I asked, “Can you go back to the beginning and tell me about your Customer Discovery process? What were your original hypotheses and what did you find?” I wanted to smack him when he said, “well our consultants said…”
The rest of his story was mostly a blur. Honestly I didn’t hear much detail other than a long litany of how other people who didn’t work for the company got out of the building and talked to customers. I started paying attention to the words again when he concluded with, “I just don’t know what we’re doing wrong?”
You Can’t Outsource Personal Experience
Here’s what I told him:
A startup exists to search for a scalable and repeatable business model.
Customer Development is the process of how you get out of the building and search for the model. Customer Development is designed so that you the founder(s) gather first hand experience about customer and market needs.
It can’t be delegated.
Let me say it again: Getting customer feedback can not be delegated.
Why? Founders get out of the building (physically or virtually) to test their hypotheses against reality. There are times when customers are going to tell you something that you don’t want to hear. Or you’re going to hear something completely unexpected or orthogonal to what you expected.
Consultants Don’t Pivot, Founders Do
It’s hearing this first-hand data that makes a founder decide to Pivot (the process of iteration in search of the successful business model.)
Pivots need to happen quickly, rapidly and often. Consultants can not do that for you. In fact, startups that use consultants almost never pivot fast enough. Why? Because it’s easy to ignore what consultants say and remain deluded by your own passion. Couple that with consultants that can’t and don’t understand the business deeply enough to know when to pivot. You have the vision, they don’t.
The breakthroughs and aha moments can be random, unpredictable—but only the founders can find and make them.
Coming out of my daze, I asked: “Why weren’t you the one talking to customers?” The answer, “Well I was too busy coding and building the product. But I knew getting customer input was important so I hired this great consultant who told me all about the features customers need.“ Ouch.
Using consultants as your proxy when you were supposed to be out there learning means you’re not really doing Customer Development and don’t understand the process.
When Do I Use a Consultant?
So should your startup ever use a consultant? Of course.
Consultants can add tremendous value to your start up once you believe you have found a scalable business model – i.e. you think you have product/market fit.
Sean Ellis, a consultant who works with early stage companies, believes that “the cost of a consultant’s time can never be justified working with startups pre product/market fit – the failure rate is just too high.”
Sean believes that, “Consultants can improve the growth trajectory after your first business model is found. (In reality, once you think you found the right model, most startups will go through multiple iterations on optimizing revenue and their business model.) This help in finding the optimal model, (which can easily result in millions of dollars in incremental valuation) is where a consultant can help. At that point it is easy to find a win/win on the cost of the consultant’s time.”
I couldn’t agree more.
Lessons Learned
- No consultants as you search for your business model
- Get all the help you need after you found a repeatable model
- If your too busy coding to get out of the building yourself find a co-founder.
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Filed under: Corporate/Gov't Innovation, Customer Development |
Steve,
Another gem of a post.
I think another reason this can’t be delegated is because getting out of the building creates a ton of the data that an entrepreneur needs for their pattern recognition to kick in. Customer contact experience, and lots of it, combines with months of deep thought and research creates the fertile soil for pattern recognition to grow. As entrepreneurs, this pattern recognition is a saving grace. Leading us to answers well in advance of pure analytical thinking and creating a base for new insights.
Consultants simply can’t match an entrepreneur’s depth of thought about the problem the company is trying to solve or the solution it’s proposing to the market. They can’t have the jarring surprise. In short, they can’t learn for you. No learning=no progress. No surprise that outsourcing learning leads to a hung process.
Thanks again for the great post.
Alan Kay has a great quote on the value of perspective: “Point of view is worth 80 IQ points.” While consultants can’t learn for you, they can offer perspective.
And if they go with you on customer discovery interviews or sales calls they may hear things that you don’t or, more importantly, hear what isn’t said.
Experienced consultants can also offer questions or alternate frames of reference that enrich your candidate pattern set or help you to become unstuck, especially at a team level. Outside advisors, experienced angel investors, visionary customers who are stakeholders in your success, and trusted members of a “kitchen cabinet” can also do this for you if you take the time to involve them. I would take advantage of every resource you have available to you to gain insight and speed learning.
Getting a startup to a working business model, like many things in life, is an open book test where collaboration is allowed: you don’t have to figure it all out on your own.
How do you feel about the utility burst of a founder in freelancers clothing, and the potential for a longer term partnership for a reasonable price?
Since our practice helps bootstrapping entrepreneurs find early customers and early revenue I have to disagree with much of this post.
I do agree that the founders need to be intimately involved in customer development, but even the Lone Ranger benefited from Tonto’s help. Working with a firm like ours that appreciates the frequent frustrations and setbacks of the early market often affords the founders a perspective that they would not have gained from their own limited experience doing customer discovery and validation. Things are rarely as bad, or good, as they seem in the moment; many things that appear to be setbacks, for example a strong negative reaction to a possible solution to an acknowledge problem, often represent significant progress.
Mr. Ellis has built a well known practice that’s predicated on market acceleration. It clearly would not make sense to engage him prior to product/market fit. But not every customer development consultant focuses on that stage in the startup’s life cycle, we focus much earlier and are not competitors in any sense.
We work with teams as they prepare for and then execute the customer discovery and validation steps in B2B markets. We helping them rehearse leaving the BatCave, we often go with them on customer discovery interviews or sale calls, we debrief from prospect meetings to formalize lessons learned and adjust the sales presentation or the target prospect definition or sometimes the feature set.
I agree with you that the founders have to do customer discovery, but a consultant can bring a perspective and an emotional distance so that more learning takes place more rapidly.
We have frequently helped teams target a narrower niche or even an adjacent niche, especially when changes in message or adding features has not helped. This change in target can be difficult for founders because it may involve an industry or targeting a new role in a firm that they are less familiar with. Everyone has a tendency is to continue to look where they know best, not necessarily where the offering may be most applicable in its current form.
There is a second customer interview that we do that the founding team is not involved in directly. With their permission and introduction to the customer, we often interview their customers and independently assess their engagement and sales process, and any service delivery issues.
For the same reason that large enterprises use independent outside firms to assess customer satisfaction, it is frequently the case that having a third party like SKMurphy not only signals a real commitment to understanding any problems (and a desire to remedy them) but the customers will frequently tell us things (or we will ask follow up questions that will uncover issues) that they either haven’t told the founders or the founders didn’t recognize as a symptom to investigate more deeply.
Sometimes these assessments lead to case studies or testimonials but if you don’t start with a full assessment you may miss significant opportunities for lessons learned.
I agree that the founders cannot “contract out” customer development and focus exclusively on product development. But customer development, in particular the customer discovery and customer validation iteration loops, is a complex undertaking. Founders often benefit from having experienced individuals with some emotional distance from the product assisting them directly as an extension of their team.
I agree with this! The only self-serving caveat I would add is that one can hire a consultant to teach founders customer development, help develop a plan, think through assumptions, etc. But in the end, the holder of the assumption must be the tester of the assumption.
Fabulous!
And I’d venture to advocate the value of “connetors” to customers/users at early stage and then connect with customers directly (removing ‘connectors’).
Also, I agree with John on his observation:
“Consultants simply can’t match an entrepreneur’s depth of thought about the problem the company is trying to solve or the solution it’s proposing to the market”, or motivation is at different level…
Thanks.
Don
Chunshen Li
I agree with this. As a former consultant and current startup founder, I believe consultants can certainly help teach and coach, but you can’t outsource the core startup feedback loop.
That could be taken as a knock against consultants, in some cases a richly deserved one. A lot of consultants induce dependency, and will happily say anything the client wants to hear. E.g.:
http://tech.mit.edu/V130/N18/dubai.html
Despite that, it’s not really a problem with consultants. Every consultant is definitionally an outsider, and people just don’t want outsiders running things. And they shouldn’t want that; the consultant is not the one who’s betting a big chunk of their life and fortune.
As a consultant, one learns that there are pretty clear limits on how hard you can push an idea. How right you are doesn’t matter; it’s all about what the clients will accept. Pivots have to come from within: they’re too radical to just take on faith from an outsider.
The key point is the one that was repeated for emphasis: getting out of the building can’t be delegated.
I’m most intrigued by this sentence:
“Founders get out of the building (physically or *virtually*) to test their hypotheses against reality.” [emphasis added]
I’m assuming the ‘virtually’ means on the phone, video chat, and other direct feedback methods rather than metrics, but I’d love to hear more on this. A future blog post perhaps?
As an interesting side-note, at Eric Ries’s Lean Intensive Alistair Croll and Sean Power (experts in web analytics) were asked whether or not “getting out of the building” was still relevant in the age of Web 2.0 metrics. Their response was an emphatic “yes”.
David,
Steve actually addresses that here: http://steveblank.com/2009/12/17/building-a-company-with-customer-data-metrics-are-not-enough/
One of the toughest jobs I have (as a custdev “teacher”) is convincing entrepreneurs that metrics do not replace in-person interviews. I would hazard a guess that the question is only asked by those who haven’t truly “got out of the building.” Those that have know the value.
Brant
Thanks for another insightful lesson. Question for you, Steve: the “entrepreneur” in this article is no doubt very busy w/ product development and therefore thought that his time is better invest in building product as oppose to “getting out of the building”. Given that these are competing priorities, and both seems critical, would you advise that entrepreneur to place higher priority to customer development? thanks.
In the fog of war, we may not able to see our real target.
The real target is a search for a scalable and repeatable business model. Product is a part of a business model, but only one part. Pricing, distribution, demand generation, etc. are just as important. Any of these links break and you don’t have a sustainable model.
Building product is a lot more seductive because it feels like progress and is much easier than getting out of the building. But in probably 90% of the cases the existing state of the product is light-years ahead of the other components of the business model.
I like this post a lot. However, I have a minor quibble. I have to think that are actually a rare breed of consultants — you and Eric Ries for example — who can actually coach a founder to do better. Clearly this role is different from the one you talk about in your post. Although I am trying to practice what you and Eric preach, I am sure that 1 hour of your time could help me and would be well worth the time.
Many thanks for all your great insights.
I think both Steve and the Consultant are barking up the wrong tree here. If you have a founder that instinctively does not get out and talk to potential customers then you don’t have an entrepreneur – you have a technician. Technicians like to build things they think are brilliant but generally are not motivated to check and see if the outside world share their opinions.
I would suggest the technician find an equity partner that is an entrepreneur or they will never build much of a business. For definition on characteristics of an entrepreneur see http://www.e-myth.com/.
Joel Lessem
http://blog.firmex.com/
Entrepreneurs can always get better at conversations with prospects and customers . Even those who have an instinctive desire to talk to customers.
To write someone off as a “technician” because their natural preference is not to do so seems shortsighted. Especially if the “technician” wants to get better at interacting with prospects and customers.
I am a big fan of the E-myth model but it focuses much more on operational excellence and the need for niche focus than the customer discovery and validation process.
Even in the scenario you suggest–a common one of two founders where one has a more “inside” orientation and the other a more “outside” focus–both founders need to interact with not only customers but serious prospects. So even in that case the “inside” founder cannot rely entirely on a partner to handle the customer development tasks.
In the same way that the “inside” founder needs the “outside” founders to be doing a certain amount of early use/testing. This allows for an independent assessment of how prospects are likely to react to the offering by someone who has some emotional distance from development challenges.
This is not a substitute for putting the offering into a prospects hands quickly. But an “outside” founder can more often avoid the mental reaction of “they are calling my baby ugly” and continue to ask probing questions on how to improve the offering instead of launching into a spirited defense of why it works the way that it does.
Perfect timing. We held a lean startup seminar in New Zealand today that covered the topic of when to pivot. One speaker gave a sobering example of how they hired an external party to talk to customers and how this approach failed miserably.
Lesson Learned.
Paul Spence
CEO
http://iwantmyname.com
I like this post a lot, and I also like the sentiment expressed by Sean Murphy that one needs to distinguish “outsourcing responsibility” from “using consultants”.
As an add I would say that some of the post could be adapted for intrapreneurial/startup situations within larger companies (which has been a key focus of mine). In many situations that I have been involved with there (e.g., exploring introduction of new products to existing customers), the consultant is helping the existing management team to get money committed, incubate and test the business ideas, innovate customer solutions that could take in the market, get a startup team in place (i.e., find the founders or build core team around the founders), etc. Once the core team is in place and the effort incubated, the consultant can start to phase out. Sometimes when doing these situations in larger companies there is more searching to be done required to find the right team mix. Support is also required because the larger company is essentially trying to start a new business while simultaneously doing their “day jobs”.
Fabulous article. As a consultant who works with a number of startups, I sincerely appreciate the last point in particular. Consultants are thrown under the bus all the time when things don’t work out, though I see it as a teacher/student relationship. A professor may provide you with all the data in the world but it’s the student that needs to understand and, most importantly, effectively APPLY that information in order to succeed, which is hard enough when the data is accurate. Throw in a little “room for error” and things can go haywire fast.
Knowing when, why and how to work with outside talent is everything.
Steve, this article hits the nail on the head. Meeting with potential users and re-affirmation of the founder’s vision is key and the research of same cannot be delegated. This is a where you learn some of the key stuff that will make your business a success or not. It is the most important part of your company’s development and a vital part of the road to Product / Market fit. It would note that in my view it also emphaises the need for PATIENCE on the part of the Entrepreneur. Take the time to do it yourself and do it properly.
Great article Steve. It’s a challenging topic. It looks like everyone agrees that the entire customer development process should never be outsourced to a consultant. The question then becomes can consultants add value to the process pre product market fit? I’m confident that good consultants can add value to the process, but I’m not sure they can do it in an economically viable way. Most pre product market fit startups will fail even if they pivot multiple times. I believe customer development is helping to improve the odds, but the odds of success will never be high. Founders have the potential for enormous rewards if they succeed, so it’s worth sacrificing a lot of income in the short term. A consultant can’t get enough stock to get the same upside, so they need to be paid in cash or a combination of cash and some stock. The problem is that cash should be conserved at this stage because it may be a very long haul until product market fit is found. If the consultant were properly compensated with stock, there wouldn’t be much stock left to allocate to future employees.
So I believe customer development can only effectively be “taught” to founders as a group. This can be as simple as reading “Four Steps to the Epiphany” or participating in more in depth workshops. Founders armed with the tools of customer development will get less incremental value from a “hands on” consultant. Still, I believe the need is there and most consultants have the expertise to fill the need; the problem is that their cost exceeds their value at this stage. I know some of the consultants have been doing this for a long time, so they may have figured out how to bridge this gap.
Our team enjoys working with early stage entrepreneurs who are still a small team. We are energized by small teams because there is little if any politics, everyone is committed to helping the customer, and the company can reach a decision in one short but thorough discussion and change direction if need be.
Without going into specifics I would suggest that you are making a key assumption in your analysis that other consultants have your business model and your compensation expectations. Other models are possible that provide value to startup teams and adequate compensation for outside consultants.
My understanding is that you work more in an ‘interim executive” capacity for venture backed startups that have achieved product/market fit and want to scale rapidly. An interim executive model clearly won’t work for very early stage firms. We work as an extension of a founding team that’s bootstrapping, often still in customer discovery / customer validation.
We understand how to provide value to a number of teams in parallel leveraging both face to face conversation and a variety of on-line collaboration tools. We support rehearsal, take part in, and de-brief conversations with prospects for customer discovery and customer validation. We also support a variety of cost effective methods for getting more customers. About 1/3 of our clients are outside of Silicon Valley now, we support teams not in the United States but in other parts of the world.
I can appreciate that you would not be attracted to the problems that we very much enjoy focusing on, but I think it’s unfortunate that you are suggesting that we cannot provide fair value to our customers for our compensation.
I agree with Sean Murphy’s comment. His consulting business model and yours are completely different. Both of you add value, but at a different point in a company’s life.
Sean Murphy adds tremendous value for startups in setting them up “getting out of the building” and how to make sense of the data they’ve gathered.
He’s one consultant I personally know (I’m sure there are others) who doesn’t confuse his role with the founders. I think of his consulting firm as a “force-multiplier” for Customer Development.
steve
[…] consultants came out in droves to weigh in on Steve Blank’s recent post, “Consultants Don’t Pivot, Founders Do.” (Myself included.) Generally, all were in agreement with Blank’s primary point: Founders […]
Thanks Steve… Have made this mistake years ago, Reading your blog and customer development has helped me get early customers signed and using our software platform. Suppose it was the product of poor advice and ignorance on my part.
Natalie Hodge MD FAAP
http://www.personalmedicine.com
” Your Doctor Comes to You”
[…] his consulting firm as a “force-multiplier” for Customer Development.” Steve Blank in a discussion in the comments for “Consultants Don’t Pivot, Founders […]
[…] lexicon so that when spoken they cast a clear vision and build a common culture. Two posts (Consultants Don’t Pivot, Founders Do and Pivoting the Business Model) from Steve Blank added the word “Pivot” to our […]
I agree, but still:
– lack of resources to even find interest on the field,
– takes a lot of time and effort,
– based on estimated potential customer profile,
– without knowledge of any lead generating techniques.
This is my concern.
It is very easy to say – founder have to do it – but it is much harder to even get the interest, to get what we estimate they will be early adopters, etc, etc…
So how? And who? Mr. Blank?
I do see a strong tendency of product and engineering oriented founders with limited business experience outsourcing most conversations with customers to “salespeople”– whether consultant or FTE.
So I’m not exactly sure why Steve is calling out consultants in particular here? Would love to know.