This must seem like heresy coming from a guy who had the title VP Marketing for 10 years and writes a blog called Startup-Marketing.com. But the fact is marketing is not appropriate for startups in the initial stages of customer development.
A newer model is emerging originally sparked by Steve Blank, author of Four Steps to the Epiphany and teacher of customer development at both Berkley’s Haas business school and at Stanford University’s graduate school of engineering. I consider Steve Blank to be the world’s foremost expert on customer development. Through his experience as CEO, Founder or VP Marketing at 8 startups (5 of which resulted in $100m+ exits – the last was E.piphany) and advisor/board member to numerous other startups, he has concluded that the ideal model is very different from the traditional startup approach of abdicating customer development to a VP of Marketing. I completely agree with his claim that none of the traditional VP Marketing skills are relevant in the first two customer development steps of a startup’s life (page 215 Four Steps to the Epiphany).
Given the high VP Marketing turnover rate at startups and more importantly the extremely high failure rate of startups, his model is definitely worth considering vs. the traditional startup marketing approach. His recommendation is to form a customer development team led by a “head of customer development.” The team should include the CEO and spend a considerable amount of time in the field with prospective customers validating/refining hypotheses about their target customers and the problems they are solving. He says this team “must have the authority to radically change the company’s direction, product or mission and the creative, flexible mindset of an entrepreneur.”
After five years in the VP Marketing role at LogMeIn, I too recognized that the initial stages of customer development are very different from marketing in the later stages of a startup or especially a large established company. In fact, I concluded that much of my success as a later stage VP Marketing (both companies filed for IPOs) was the result of momentum we had built in the early stages of customer development. I decided that going forward I would specialize in early stage customer development.
I was first introduced to Four Steps to the Epiphany when I was Interim VP Marketing at Xobni during the first half of 2008. I had been looking for resources to help me understand how to drive adoption of this innovative market-creating product (a very different challenge than we had at LogMeIn which disrupted an existing market). The book provided a great framework to follow as we worked to drive early customer adoption. Since then I have helped to accelerate market adoption at two additional startups, while continuing to advise at Xobni.
Given my obsession with startup customer development, I was thrilled for the opportunity to meet with Steve Blank for coffee earlier this week and was flattered when he invited me to present to his class at Haas on March 10th. We agreed that my approach really begins at his Customer Validation step.
There are two key twists I’ve made to his framework. The first is that I drive the entire process with metrics. In fact I’m working closely with KISSmetrics (where I am an advisor) to define all the tools and reports needed to build a complete Customer Development Platform.
The second twist is that I add a customer development specialist when the Validation Step begins, which is the role I fill with startups. I belive eventually many people will specialize in this critical stage. Without a specialist, startups waste critical time and resources deciding where to execute. It’s surprising how similiar the process of uncovering the critical information needed to drive customer adoption across different types of startups.
One place where my views diverge a bit from Steve Blank’s is that he suggests that a good candidate for the Head of Customer Development is someone with a product management or product marketing background. The key issue I see here is that experienced product marketers suffer from the “curse of knowledge.” They know enough about product marketing to want to focus efforts on areas that are usually irrelevant to startups. Having the discipline to follow the right process at this stage is much more important than experience. The good news is that I’ve found ambitious, analytical recent college graduates to be ideal candidates. They are easy to find and their salary and equity requirements are also much lower than a VP Marketing – freeing up resources to bring in a customer development specialist. This combination accomplishes more results faster than an experienced product marketer by themself, and generally costs the startup less cash and equity. Of course if you already have an experienced marketer I wouldn’t advocate replacing them. This guidance is really directed at startups that are trying to hire an experienced marketer – and a warning that you will be paying a premium for skills that aren’t critical at this point.
Once the startup has discovered how to drive customer adoption and begins building momentum, it should be easier to attract the long-term VP Marketing (or promote the head of customer development).
Andrew Chen
Brant Cooper
Dave McClure
Eric Ries
Jamie Siminoff
Steve Blank
Sean,
Thanks for the post and the recommendation on the book. I’ve picked up a copy and am finding it very useful. Adds quite a bit of structure to the processes I’ve been developing, testing and starting to write about.
What astounds me, however, is the assumption that customer development happens post-funding. In my experience, it’s difficult to get companies who have already over-promised revenue to fully buy into the program. The pull of opportunism is too strong with the board breathing down your neck. We need to do a better job convincing entrepreneurs to intelligently segment their market, prior to funding; prior to getting themselves into trouble.
Regarding “don’t hire a marketer,” I’m not sure I agree; they just need to hire the right one! : ) I get your (and Blank’s) point, but one doesn’t stop hiring all VPs of Engineering because some don’t know Agile programming. The point is that different companies at various stages of development need marketers with different skill sets. The pre-Madison Ave marketers need to educate investors and technologists about early stage marketing. Like you’re doing!
Sean I agree here with most of what you said.
Since word of mouth is the most powerful “marketing tool” for any startup, and startups lack the money that it will take to get a proper marketing campaign off the ground, product quality is crucial.
Does it solve an important problem?
Does it solve this problem well?
How many people need this solution?
Initially when I started thinking about how to market a startup, I was overwhelmed by the possible actions. This article somewhat clears up my tensions. 🙂
Additionally, I really liked your usage of the “curse of knowledge” phrase. I first heard this phrase in the book “The Wisdom of the Crowd.” by James Surowiki.
Finding opinions and ideas outside of the group is crucial.
In startups, positive feedback loops are deadly. Look at Webvan for the results of a positive feedback loop in a startup.
I am glad I was able to introduce you to “Four Steps to the Epiphany.” It seems to have had a profound effect on your approach to early stage marketing. I have enormous respect for Steve Blank but he is not the only one to look at the pre-Chasm or customer development problem. Certainly Mark Leslie’s “Sales Learning Curve” has a grasp of a different part of the same elephant, along with Katsaros’ and Christy’s “Getting it Right the First Time,” and the “Sell, Design, Build” model from the SyncDev team at http://www.productdevelopment.com/ and Bijoy Goswami’s “Demo, Sell, Build” at http://www.bootstrapaustin.org/wiki/index.php/Map
Eric Ries at http://startuplessonslearned.blogspot.com/ has extended Steve’s model, having worked with him at IMVU, to include Agile and Lean thinking. Babak Nivi of http://www.venturehacks.com/ has also been actively synthesizing a scientific approach to early stage ventures that integrates customer development with Agile, Lean, and the new product introduction models from folks like Don Reinertsen at http://www.reinertsenassociates.com/ who coined the term “Fuzzy Front End” more than two decades ago to capture the evolving nature of early requirements as they are refined by early customer feedback and results from product architecture planning.
And it’s an area our firm also works in as you were kind enough to note on March 9, 2008 after we had had several conversations about Xobni’s situation: “Sean Murphy’s focus on early stage software firms looking for traction and scale mirrors my own. I have found his suggestions and feedback to be honest, direct, and extremely helpful.”
I admire what you are trying to accomplish but I think you should recognize that there are many more folks working on “Customer Development” than just Steve Blank and yourself. In fact reading the earlier comments I was delighted to learn about Brant Cooper at http://market-by-numbers.com/
(This is a reply to Sean Murphy’s comment above) Your recommendation to read The Four Steps to the Epiphany last year has been an important addition to my customer development approach. Thanks again.
I’m not familiar with some of the other books you mentioned, but I’ll check em out. Hopefully they will provide as much value as The Four Steps to the Epiphany has. I’m sure there are lots of great pockets of wisdom and experience out there, but overwhelmingly I find that customer development is still a very flawed process at most startups. But that is changing. Within a few years, I expect it will be standard practice for startups to contract a customer development expert to work alongside the founders through this challenging stage. Clearly we won’t be the only ones providing this service. I’ve encouraged Brant and several others to help us fill this void. I plan in the future to put together a list of individuals and companies that are offering customer development help. In the meantime, feel free to post another comment describing the services that you offer, prices, terms, references, etc.
And a systematic approach to customer development is just part of a broader movement toward lean startups. I had coffee with Eric Reis yesterday and we discussed this ecosystem that is emerging to support a lean startup go to market approach. It is definitely an exciting time to be working with startups.
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