First things first: Make sure you have a support network around you;
Answer the fundamentals for lean canvas:
1.Who are the customers?
2.What are their problems, needs or desires?
3.How do you solve them?
4.What is the value that you create for the customer?
5.How do you reach the customer?
6.Who do you compete with (think beyond just direct competitors – what are the current solutions that you will need to displace)?
7.What are your advantages over the existing solutions?
Which idea to choose? Optimal stopping problem – 37% rule (You cannot be always right, but this way you will be less wrong.)
Understand what to build: Product versus services versus solution
Product is a tangible item that can be consumed in some way by the customer. Costs are deterministic, thus the pricing can be pre-determined and is based on usage or features. Costs scale at a lower rate than revenue. Usually requires investment upfront to then derive value later. Should always be reused with new or different customers with no or minimal changes. Usually based on engineering output.
Services is an intangible item that is performed to or for the customer. It can have a standard process/approach, but it does require tailoring for each individual case. Costs cannot be determined ahead of time, only work-unit rates and, at best, an estimated effort. Costs scale linearly with the revenue. Usually has low upfront setup costs. Can rarely be re-used with new or different customers. Usually based on human capital.
Solution is an outcome of applying a product or services to solve a customer problem. Focus is on benefits, rather than features. Pricing is based on the value created, delivered or captured, rather than costs.
Lean Canvas model
Two most important risks for an early business:
Market risk – is there a market for your product?
Product risk – can you actually build the product?
Lean Canvas is not box-ticking exercise – Only once your thoughts have been organised into a structure, can you understand what you are testing your hypothesis against
If you are unable to concisely define each field by distilling it into two or three bullet points, chances are that you have not yet fully understood the area and need further insight
The dirty business secret: most of the time, reports are initiated and paid for by the company that is praised the most in it.
‘good artists copy, great artists steal’. It took a lot of energy for your competitors to be in the position they are in today – use their work as a shortcut to learning market needs, industry keywords and product metrics.
Identify exactly what metrics really matter to your growth and the success of the product. Then, learn how to measure them with as little noise as you can. Finally, be obsessed about constantly improving them.
Chapter 2 highlights the customer vacuum: if you’re not addressing real customer problems (with the right message, product, market, channel, implementation, process, value proposition, etc), your startup is extremely likely to fail.
Business development is exactly that – a repeatable process that helps you to understand your customers.
The Business flywheel. It is a fundamental, cyclical part of the company process. Each step takes input from the previous one and amplifies it as an output for the following step.
The best way to make sure it does not slow down is to understand what metrics matter at each stage of the process and measure them meticulously. ‘If you can’t measure it, you can’t improve it’
Ideas do not matter as much as the right execution does. In fact, if through this process you do not find already existing competitors, or discover someone else who is working on exactly your problem, something is wrong.
The reality is that getting to your first ten enterprise customers requires you to focus on business development, not on sales, not on that old startup bullshit of ‘just talking to people and seeing what happens’.
What’s the difference between business development and sales?
Business development is a process of discovering WHAT and WHERE. Sales is a process of taking the WHAT and WHERE and making it SCALE.
Business development is all about finding your innovators, understanding what works and then checking your hypothesis with early adopters.
Sales, on the other hand, is all about applying and adopting already-learned lessons to the early and late majorities in order to scale your business.
There is a big gap between those groups, known as ‘The Chasm’.
Early stages are very unscalable – but by skipping it we will not have anything to scale, or worse, will try to scale the wrong thing.
One question from us:
Which of your products are in business development and which are in sales?
Another week, another chapter from The Founder HandBook – this time Chapter 1 – a short chapter with some punchy insights on why startups fail. We pulled the reasons – thanks to Crunchbase…over the next few weeks of sharing insights, we’ll outline how be less wrong….and get to success.
Focus on being ‘less wrong’ rather than ‘right’
‘Everybody has a plan until they get punched in the mouth’
Never full picture – rapid planning based on customer feedback and iteration
goal is not to go for the right answer, but rather to minimise the wrong choices while learning.
Failure to pivot / no financing / run out of time / failed expansion / poor marketing / poor sales execution / no market need, are only manifestation/outcome of poor business dev (i.e. not understanding your customers).
One question from us
What challenges do you have ahead that could lead to failure?
Over the upcoming weeks, we’re going to share a summary of each of the chapters from the Founder Handbook – how to get to your first 10 Enterprise customers. A weekly digest of learning and action. Of course, you can always download a pdf copy the full book through the following link https://thefounderhandbook.org/
First and foremost – the top 10 takeaways and one question from us:
Customers, Customers, Customers.
You cannot build a company in customer vacuum.
You need to learn how to listen to them because they are going to make or break your company.
We are all in sales.
Most failures (e.g. outcomes like no financing, out of time, poor sales or marketing execution) are consequences of lack of business development (i.e.g not understanding your customers well).
Business development helps to nail down the right message, product, market, channel, implementation, process, value proposition…
Business is a big fly wheel – all parts need to work in sync. So are many business processes , like business development.
You never stop talking to customers and learning.
Success is everyone’s responsibility, and so is failure.
Business development is NOT sales!
Business development is a process of discovering WHAT and WHERE.
Sales is a process of taking the WHAT and WHERE and making it SCALE.
Your goal is to learn problems, not to sell a product (that you don’t even have).
Early stages are very unscalable, but that is where the most learning comes from.
By skipping grunt work of business development, you will not have anything to scale, or worse, will try to scale the wrong thing.
Most of your assumptions will be challenged.
Think about the exponential curve – in the early stages the growth is very slow, and then it explodes.
Competitors are just another tool, so learn from them to accelerate yourself.
The bigger the market, the more competitors, the more opportunities to differentiate, which in turn attracts more customers by catering to more specific needs, making the market bigger.
You are unlikely to afford to start a new market.
Actions speak louder than words and what actions matter will change over time.
Measure actions that matter and not hypothetical situations.
Base your metrics on KPIs that actually bring you closer to your overall goal (ultimately it’s making money), not on what feels good or is “trending up”.
Think about exponential curve – slow at first and then explosive. The right metrics early will help you see trends and insights that indicate whether your hypothesis can grow.
Product-market fit (PMF) is a process rather than an event
You cannot just ‘achieve it’ and be done with it
To generalise, PMF is a continuous process of uncovering problems (the ‘market’ bit), creating solutions to them (the ‘product’ bit) and measuring how much value someone gets because of it (the ‘fit’ bit), in that order.
It is more of an art than a science, a matter of combining all the different tools. It is a skill that you will hone as a founder.
Once you in the right direction the signal will resonate & amplify itself.
You are the hero.
Getting to your first ten enterprise customers will demand all your drive, all your energy, your passion and instincts.
We’ve shared our experiences, the tools, frameworks and methodologies to get there.
Now YOU are the one who has to make it happen.
Time is scarce and focus is the name of the game. Speed is your biggest asset.
There is no big launch.
Disagree and Commit (pivots are a full commitment, can’t execute if some of your energy is wasted on something else — focus on build-test-learn cycle and move on).
Do not look for solutions to keep the old clients, rather than being laser focused on executing your new vision.
Perfect is the evil of good enough – it’s usually the procrastination manifesting itself.
P.S. Most innovation does not come through innovation teams.
Until next week….one question from us
Where are you spending the majority of your time on business development? Is it really the right customers that will take you to your next major milestone?
One of the most common types of advice Y Combinator gives to founders is to do things that don’t scale. A lot of would-be founders believe that startups either take off or don’t. You build something, make it available, and if you’ve made a better mousetrap, people beat a path to your door as promised. Or they don’t, in which case the market must not exist.
Actually startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going (paulgraham.com link)
Paul Graham: What does it mean to do things that don’t scale?
Marc Andreessen penned his famous “Why Software Is Eating the World” essay in The Wall Street Journal in 2011. Today, the idea that “every company needs to become a software company” is considered almost a cliché. No matter your industry, you’re expected to be reimagining your business to make sure you’re not the next local taxi company or hotel chain caught completely off guard by your equivalent (techcrunch.com link)
Original essay by Marc Andreessen “Why Software Is Eating the World” (a16z.com link)
Cover art by https://andrebartholomeufernandes.com/why-software-is-eating-the-world/
If you would like to expand on the topic as a guest post, know of more resources/posts/essays/etc that we should share here or simply spotted an error, please get in touch with us!