Category Archives: Value Proposition

120 Conversations

120 people!
120 people!

We’re entering the fifth week of our twelve week program at the LaunchPad. As we experienced last year, many of our teams are opening up more questions than answers via their Customer Discovery process. Many are having a hard time getting people to talk to them and several are questioning their core hypotheses on multiple levels. It’s a little scary but experience tells us that this is a good thing- it means they are cracking open their business model and finding out where the real value may be hidden.

And a few may be discovering a key thing about doing a startup:

“If you can’t find 120-150 people to talk with about your startup, over three months, then you might ask yourself: Do I actually know anything about the problem I’m solving?”

This is the key to the uncertainty and questioning we saw at our last round of presentations. The word ‘pivot’ started appearing. A few changed focus, probably prematurely.

What’s really going on is they are just starting to talk to enough people. Typically at this stage they have talked to 15-25 in total,  well below the expected 10-15 per week. This is where you discover how  persistence, and making full use of every resource you have, are the keys to startup success. It’s also where teams discover that focus is critical. The more focused you are the easier it is attract interest and feedback.

While it seems that solving more problems should lead to more connections, it’s simply not the case. When you accurately define the problem -the main problem-  that your startup is attacking, you become a lot more interesting. Why? Because you are starting to acquire expertise which you can share, adding value to your conversations.

But, ask yourselves: If after four weeks we’ve only had a handful of conversations, what are we doing wrong? Are we in the wrong market? Solving a problem that isn’t urgent and painful enough? Or maybe not really all that interested in what we thought we were doing? These are important questions to ask…and they can lead to breakthroughs. We saw it last year across the board.

So, hang in there and keep having conversations!

Google Analytics Academy

Google Analtytics copyMetrics are a very important part of the Lean Launchpad process. By keeping track of interactions with customers in a variety of ways you are building a convincing story about the viability of your business model; a story that will be invaluable when you start selling, acquiring users or raising money.

Some of the things you’ll need to be measuring can be tracked with a simple spreadsheet:

  • Customer conversations
  • Development milestones for your Minimum Viable Product (MVP)
  • Customer roles and relationships

Interactions that take place online, via the Internet or mobile, are a different story. Google Analytics is free software activated by placing a line of code into your site or app. That line of code gathers a wide range of information about those interacting with your site or product including:

  •  Where, when and how (what device or browser was used)
  • Length of interaction and where you ‘lost’ them
  • Hotspots on your pages
  • Behaviors within apps and sites
  • Their ‘path’ through the experience you are providing

…and much, much more. So much, in fact, that even experienced users of Analytics often miss important stats and metrics or don’t understand how to use them to do testing. Fortunately Google offers a service called Analytics Academy that provides both structured and self-guided courses for both beginners and experienced users.  Find out more here.

This really isn’t optional, though many startups don’t take full advantage of it. The reason I say that, is it gives your startup an incredible advantage as you gain sophistication with these powerful tools.

What is a Business Model Canvas?

The Business Model Canvas is a work sheet
The Business Model Canvas is a work sheet

The canvas is a central tool for capturing what you learn during your customer discovery process. You start by making a best guess at filling out each section, knowing you’re almost certainly mistaken. Then you go out and talk to people, focusing initially on defining your problem, solution and audience (Value Proposition, center box). Getting this right is the ultimate goal of the HTRLaunchPad process because accurately defining a value proposition means you’ve found your scalable, profitable business model.

But there are nine boxes on the canvas and each contributes to your knowledge base. You may, for example, be discussing pricing and find that the market wants the service bundled with other services by a third party (channel). Even if this was not the focus of your conversation it is valuable and what you learn should be added to the Channels box on the Canvas.

As you proceed there is going to be a lot of erasing and rewriting of your work sheet. Things you assume are correct early on get revised or completely changed. And during the process the Canvas serves as a snapshot of the knowledge you’re accumulating and the progress you’re making. It may even tell you that you’re not making progress and have to consider a change in plans (pivot).

When you’ve had your 120-150 conversations your Canvas will represent your business model. You should have a much clearer idea of how you market, operate, generate revenues, your financial requirements and more. It all fits into the Business Model Canvas which becomes, at that point, a model for your operational business plan.

It’s a deceptively powerful tool that forces entrepreneurs to succinctly define all the important pieces of their business on one page.

Excerpt: Stay in The ‘Problem Space’ for As Long As Possible

(this is an excerpt from The Customer Discovery Matrix; A Concise Guide To Starting Anything)

Listen closely. This is the key takeaway for the entire Customer Discovery Matrix:

Stay in the ‘problem space’ for as long as you can.

When you go through your twelve weeks of Discovery, you are basically looking to learn and flesh out three aspects of your business model:

a) The problem you are solving,

b) The nature of your solution,

And

c) The ultimate value gained by the customer.

All of these are critical to the success of your endeavor, but the first is far more important than the others, since finding solutions and ascertaining value are completely dependent on getting the problem right.

Most businesses, products and initiatives that fail do so because they are solving the wrong problem. The ones that are successful have discovered that all-important ‘product/market fit’, which stems from an intimate knowledge of the problem they are solving, from a customer perspective. This fit must be pursued much like the work required for the fit of a good suit. The tailor measures everything. He knows the way the fabric will respond, where to build in movement and what is best for your physique. Only then does he ‘productize’ this knowledge and cut you a suit – one that fits like it was made with your personal needs in mind, because it was. Get your fit right before you start cutting and sewing.

This means that you need to be relentlessly thorough about uncovering your customers’ real problem, the one whose solution will make them eternally grateful (or at least until the next problem pops up!).

Don’t solve multiple problems at the beginning. If there are multiple problems you could solve, work on the one that represents the biggest pain point for your customers. When you see what we in the software business call ‘feature creep’, you’re seeing someone trying to solve multiple problems. They are adding bells and whistles to add value, but the reality is that they are usually causing distractions and delays, and this is something startups can ill afford.

When you read the stories of successful businesses, you almost always find that they started with one problem and focused on it. Google’s founders wanted to find a way to search the research data at Stanford when they were grad students. They spent their first years, all the way up to their IPO, refining their approach to search until it worked. Everything else followed on from there. Oxo Good Grips started with a potato peeler. If you’re old enough, you remember the stamped metal potato peelers that hurt your hands. Peelers had not changed for 50 years, until Oxo came along. They made a comfortable potato peeler, and then leveraged that success to hundreds of related products and a great brand reputation.

Google solved the search problem.

Oxo solved the comfort problem.

There are endless examples of this and few exceptions. In fact, when you read about the companies that got off track, it is usually because they became distracted with adding features and solving a universe of problems before they mastered the one problem that was within their grasp to solve.

The Problem Space is an interesting place. We believe that immersion in it will make product development much more successful. Simply identifying the most important solution for your customer, the one that solves a pressing need, will get you started as a business. Knowing as much as possible about the Problem Space will give your new business legs.

Software Startups Defined: 2014 Edition

Note: We’re accepting applications through January 31, 2014.

Apply Here!

We’ve been asked to define ‘software startups’ a little more clearly and it’s a good question. First a little history. Software companies back at the beginning of time (1990ish) actually wrote software from the ground up. Most software is basically a form of a database with customization and a user-interface. Back then, if you were creating an application you typically wrote code for these components. This led to companies like Microsoft and Netscape which were ‘pure’ software companies.

Today this has changed radically. With open source components like databases and WordPress (a database), ecommerce plugins, hosted software and cloud services like Amazon Web Services (AWS), people with ideas have easy access to software tools without doing extensive backend programming. This is particularly so at the early startup stage where issues like scaling to large numbers of users are less of a concern. So a software startup today is much more a business model made possible by software. That’s the kind of thing that we see in the HTRLaunchPad applicants.

The key phrase is ‘business model‘. The methodology we use with our teams has a specific goal: To find a scalable, profitable business model, enabled by the use of software. Scalable means it can grow exponentially into a larger market and business. Profitable means it can make money as it scales.

This definition generally excludes so-called ‘lifestyle’ businesses, companies where the founders serve a localized or niche market that can be comfortably profitable but may have a limited growth potential. However, today, because of global reach and widely available tools even these lifestyle businesses have more growth headroom. So that definition, once reviled by investors, is now also changing. Software and connectivity are unleashing the limits on many business concepts.

One example, to clarify our criteria, would be a plan to open a local business like a yoga studio or a pizzeria. They don’t fit the software-enabled model that offers a growth curve. However a really compelling pizza or yoga app with a revenue model might make the cut!