I just listened to a lecture that really summarized why we are in business.
To set the stage, barely one out of a thousand companies become big successes. Of those 999, fewer than one out of ten are there because their product doesn’t work; more than nine out of ten fall in that group because they fail to find customers or a market.
We (Academic Business Advisors) are in business to lower that sales and marketing risk for education technology companies.
I got that insight listening to Steve Blank’s talk in Stanford University’s Entrepreneurial Thought Leader Series. Here is the summary of his talk; these are valuable concepts for anyone thinking about launching or expanding a product or business.
Here’s the standard, accepted model for launching a business:
Most entrepreneurs, reinforced by their investors, advisors, and board, are focused on getting a product out and to the first customer. But, most of the failures aren’t because the product doesn’t work; they are because the product couldn’t find a market. The model above causes hiring of staff, sales, and marketing based on events in the product development cycle; that’s backward. You design, build, test, and refine for a successful business based on market need and feedback.
What entrepreneurs need is a model and tools that reduce sales and marketing risk, because that’s where businesses are most likely to fail. If you don’t find the right market and you don’t figure out how to get lots of customers early in the process, you’re just going on a random walk. As Blank summarizes:
The job of an entrepreneur is to become a domain expert enough to understand a day in the life of their customer, their buyer, and anyone else in their organizational exchange. If you can’t do that, don’t do it, and become like almost every other entrepreneur who goes out of business.
If you’re thinking of creating a product or company, the first rule is to understand that you have made a lot of guesses or assumptions about the market. You’ve assumed that there is a problem, and that you know what it is. You’ve assumed you know the people who have that problem, and that there are enough of them to matter. You’ve assumed that you can get those people to pay you to solve that problem with your product.
You need to figure out how to turn those assumptions into facts. How do you do that? Get out of the building and talk to the people who will be using and buying the product. Is the problem that you think you’re solving really a problem for them? Is it so important to them, that they would actually pay you to solve it with your product? Do they have the authority and funds to pay what you need to continue in business?
The best way to do this is to find early ways to get them to buy. Discover the minimal feature set that customers will buy; and use an agile development methodology so that you can iterate quickly to meet how they really use the product. A good launch is when you’re able to define your customer archetype: what they do every day, what they think is important, why they think it’s important, what they buy and use, and how they pay for it.
A startup is not a junior version of a large corporation. You don’t need to start with a CRM system, or a VP of this and a VP of that. The entrepreneur and developers have to be listening to customers and hearing their feedback directly, not filtered through a vice president of sales or marketing. Can’t you just hear the entrepreneur saying to the VP of sales, “No, you’re wrong, we don’t need to change the specs; you just need to explain the features better, then they’ll get it. If you can’t do that, we’ll find a VP of sales who can.”
Everyone in the company needs to be part of the customer development team.
Yes, you need to develop a great product or service and sell it to your first customer.
The goal of the startup isn’t launch to first customer; the goal is to develop a scalable sustainable model, so you know that $X in increased sales or marketing results in $Y of increased sales and usage. You can only do this when you know how your customers think.
To be a successful entrepreneur or developer in the education sector, you have to understand how your customers think. When you know who they are, how and why they buy, how they process information, what they think they need, and how they pay for it, and you’ve got the product or service they can buy and use to solve those problems, you’re on your way.
Here’s an exercise to try.
If you have a great idea for an educational product; write down the problem that that idea solves. Then write down who will use it, who will buy it, and how they will pay for it. Then talk to 10 of those people who you think will use and buy it. Ask them, do they have that need, do they think your solution solves that need, would they be willing to pay that much for that solution, do they have the ability to get those funds, and what other significant or bigger problems do they face. I’d be very surprised if you come out with the exact same product you came in with; but I’d expect that your product and potential company would be significantly stronger.
This dovetails with what we at ABA do. Every day, we see really smart people who are passionate about kids and have created products that can impact the way they are educated. Our job is to help their team understand where they have made assumptions about the marketplace, test those assumptions, modify their approaches, and then develop that scalable, sustainable model to success.