Monthly Archives: May 2009

May 18, 2009

Free Customer Development Help – Survey.io

I’m excited to announce a project that I’ve been working on with KISSmetrics called Survey.io, which provides startups with a free and easy way to prepare, distribute and analyze an initial customer development survey. It includes the content of the survey I use to verify that a startup is ready for 12in6 to work with them.

I recommend sending the survey to a random sample of people who have:

  • Experienced the core of your product offering
  • Used your product at least twice
  • Used your product in the last two weeks

Determine if you are ready to scale

For startups, this survey is an ideal way for you to determine if you should begin the final preparations before aggressively scaling customer acquisition.    The most important question for determining how well your product is resonating with early users is question 2:

How would you feel if you could no longer use [product]?

  1. Very disappointed
  2. Somewhat disappointed
  3. Not disappointed (it isn’t really that useful)
  4. N/A – I no longer use [product]

If most of your respondents are saying that they would only be “somewhat disappointed” without your product, they are really telling you that it is only a “nice to have”.  When asking users why they selected this answer, I often find that they are focused on commodity aspects of the product and they know of a replacement product.  It’s very difficult to build a business around a “nice to have” product, so you should keep your burn low while you iterate your core experience to make it a “must have”.

If however, you find that over 40% of your users are saying that they would be “very disappointed” without your product, there is a great chance you can build a successful business on this “must have” product.  This is the time to reallocate some development resources to optimizing your funnel and messaging as described in this blog post on the Startup Pyramid.

Survey.io to develop value proposition

The survey also provides some useful early feedback for verifying use cases, developing your value proposition and positioning against the most common alternative solutions.  This feedback is directionally useful, but I recommend significantly more research (via customer surveys and interviews) before finalizing your value proposition and positioning.

I strongly encourage you to setup and run your own customer development survey via Survey.io.  It only takes a few minutes and it free.  Here’s the link again.

May 12, 2009

What is the Lean Startup Approach?

It took a recession for entrepreneurs to finally start launching startups the right way. But in my experience, a lean startup approach is ideal in any economy.

The two key pillars of the lean startup are customer development and agile product development. Both involve a systematic process of learning through feedback and driving improvement through metrics driven testing. Contrast this to the traditional startup approach of bloated budgets supporting large marketing and development initiatives based purely on intuition.

While I have been working hard to evolve and promote metrics driven customer development, Eric Ries has evangelized the complete lean startup approach. And he has included practical execution guidance (often to the annoyance of more guarded practitioners of agile development).

All startup founders and engineers should find the time to attend Eric’s workshop – if you can get in. You won’t be disappointed.

May 4, 2009

Keys to Unlocking Startup Growth

When a startup takes VC funds, they usually accept the premise that they need to “get big fast”.  VCs don’t fund lifestyle businesses.

Unfortunately desire for growth causes many startups to make poor choices.  There are generally two opposite mindsets that lead to the same mistakes:

  1. Overconfidence: “We have lots of money, so let’s move fast (no need to be cautious).”
  2. Panic: “We are running out of money, so let’s move fast (get traction before we run out).”

For an entrepreneur focused on growth, it seems natural that they should “get the word out” about their new innovative solution. Thus many startups quickly launch awareness building initiatives ranging from advertisements in a tech magazine to exhibiting at tradeshows.   Generally this is a complete waste of money.

While experienced marketers recognize the need for some positioning work upfront, they still generally lack a broader understanding of where to focus resources and in which order. 

The first time I saw an effective go to market roadmap was when I read Steve Blank’s Four Steps to the Epiphany.  His roadmap consists of the following four steps:

  1. Customer discovery
  2. Customer validation
  3. Customer creation
  4. Scale company

He warns that a company should not kick into growth mode until reaching the fourth step.  By this point they have figured out a sustainable and scalable process for acquiring and monetizing customers.  If you haven’t read the book, I highly recommend it.  For a more detailed overview of the book see this post from Eric Ries.

The approach I’ve used to attract 10s of millions of users to startups is similar, but allows growth a little earlier (click graphic below for full size).  

unlocking-growth
 
Within a few weeks of initiating the understand phase, we generally have enough user insight to baseline allowable acquisition costs of a new user and begin iterating.  It can be tempting to start building all customer acquisition channels that fall within this allowable acquisition cost, but finding and managing these channels takes too much time to already be a priority.  Instead, we just want to generate enough new user volume to iterate landing pages and sign up flows.  These iterations can increase the allowable acquisition cost by more than 10X in only a few months. 

At the completion of the iteration phase we can put all of our energy into building profitable customer acquisition channels.  With a much higher allowable acquisition cost, the process of building profitable channels is relatively easy (and even fun).  I recommend starting with free channels first and ultimately spending up to your allowable acquisition cost.  This recent post gives more details on building these channels.

May 1, 2009

The Lean Startup Era?

Steve Blank and Eric Ries presented their lean startup approach to a very receptive crowd at last night’s Startup2Startup dinner in Palo Alto.   Here’s a link to the must watch video.

Highlight’s of of the presentation include:

  • Startups fail from lack of customer – not product failures
  • Fail fast and often on the path to success
  • Decide on a business model early
  • The correct customer development approach changes by market type

Following the presentation each table discussed the topics over dinner.  I was pleasantly surprised that  the entrepreneurs at my table had all implimented some form of customer development and agile development.