Steve Blank Hands A New Owner’s Manual to Startup Founders

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appreciate how hard it is. Otherwise, if you hire this out, you will always be beholden to someone else who is capable of bullshitting you.

WR: If you don’t have any customers, how do you find people who are willing to take the time to listen to you about your idea and give you honest feedback?

SB: I’m just going through this now with the scientists participating in the NSF iCorps program. Their average age is 45 and they’ve been sitting in the lab for the last 20 years. So the first thing I say is, “Do you have any peers?” “Yeah.” “Got any former students in industry?” “Sure.” So the first thing is to make a list of those people. The mistake is that people think the first meeting has to be with the highest-level person you can think of, but right there is where they go off track. You want to be talking to the lowest-level people, because your odds of getting your presentation right on Day One are zero. You are going to be wrong. And you want to get it right when you get a shot with the CIO or the VP of engineering, so you have to practice.

If you want to get somebody to talk, my favorite thing to do is to call after 6:00 pm, when their secretary is gone, and say “I got your name from a person who said you were the smartest in the industry. Can you give me 15 minutes? I have nothing to sell you, I am just trying to understand if this is an important problem or not.” If I said that, wouldn’t you at least listen to the next 10 sentences?

The hard part is to ask the right questions, and then to shut up and listen like you really do care about what problems they have. What you are trying to do is understand the fit between the value proposition and the customer segment. If you remember the business model canvas, this is just one box—there are seven other boxes. But once you start these dialogues going, customers will teach you all this stuff. How do you prefer to buy? What do you read? How do you learn about new products? Customer development is a process—it’s the z axis of the business model canvas. Once a week you can use what you learn, create a new canvas, and tear off old one. Then later you can play it back like a filmstrip, and holy cow, now we can see the journey!

WR: It’s funny—when I interview entrepreneurs, I always ask how their ideas evolved and what kinds of pivots they went through. But a surprising number of them claim that their idea was fully formed from the beginning.

SB: Entrepreneurs always tend to reinvent the past. They say, “Oh, I had this idea from Day One.” I think the real story is much more interesting. It’s not about how stupid we are, it’s about how well we learn. The ones who get rich are the ones who figure out that startups go from failure to failure, and it’s about how quickly and cheaply you learn from those.

In the past, the whole system we had in place required firing executives to bring about change, instead of saying “Hey, this isn’t the right customer segment.” I used to get called in by some VC friends who would say, “Steve, we have a company with a marketing problem.” I would say, “Why is it a marketing problem?” They would say “Sales isn’t making their numbers, so it must be about positioning.” It wasn’t about positioning. They just didn’t have the tools or the language to know that they weren’t going after the right customer segment. But once they’ve hired 12 people in sales and jacked up their burn rate, it’s too late.

We now have a radically different way to think about this stuff. It means you never look at startups the same way again.

WR: So you’ve got a unified field theory of startups. But as Karl Popper taught, for any theory to be truly scientific it has to be falsifiable—there have to be built-in ways to prove it’s wrong. In what ways is customer development falsifiable?

SB: Simple. If you do this and you actually have a higher failure rate, or you do this and you have no difference in liquidity, it would be false. We now have five or 10 different ways we can measure this. What I loved about teaching the first NSF cohort was that it was pretty well instrumented. They did a ton of surveys with the scientists about their knowledge of customer value propositions and so forth before and after the course. And at least for this small survey sample, we got some really encouraging data. I think what we are seeing is that you can either try to pursue your business through the traditional plan of over-raising venture money and then chasing dollars, or you can chase customers—which is a lot more fun and productive.

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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