The number 1 reason startups fail is because there is no market need for what they are offering. Founders make a product and no one engages, no one buys and no one cares.
The number 2 reason startups fail is because they run out of cash. Oddly enough, this is a side-effect of reason number 1. If you spend all your time building something people don’t want, you will be forced to close as you have no foundation with which to generate revenues or to get funding.
Inversely, if you create something that people are excited about, something that people are clamouring at your door for, money will not be an issue. If there is a large demand for your product, figuring out monetization is relatively easy.
Which brings you to an important question: how do you create a product that people want? This is where lean startup methodologies come in. The commanding goal of the lean approach is to find demand for your product before you run out of money. Because of this need to do things cost effectively, lean prioritizes talking to customers (cheap) over building products (expensive).
One of the greatest books an entrepreneur can read if she wants to learn these methodologies is Running Lean by Ash Maurya. In it, he describes in depth the process of talking to customers and how to understand their needs. One of the objectives of speaking with them, he clarifies, is to get concrete answers to three questions:
- Can you solve a significant problem people have?
- If your product solves the problem, do people want it?
- If they want your product, will they pay for it? If not, who will?
Luckily, the first question you can often answer yourself. For example, we all want a cure for cancer. Unfortunately, the years of research this takes is beyond the capability of a typical startup founder team. On the other hand, building an app that connects sellers and buyers of vintage porcelain Elvis Presley dolls is. And if you have an idea that is somewhere in between, you do research. When Elon Musk decided he was going to create a space agency to bring people to Mars, he probably spoke with a few rocket scientists first.
But for most startups, questions 2 and 3 are more challenging to answer, as it involves speaking with customers and speaking with customers is hard. Exposing your way of thinking to a potential client may result in the realisation that your vision was wrong. You risk seeming foolish or crazy. In the deepest recess of your mind you may even feel like you will be laughed at, humiliated in front of your peers, for your idea that you initially thought was game-changing, but turns out to be ludicrous.
To some degree, this is the just the plight of the entrepreneur. Your ego has to be strong and you have to take the emotional beatings. But Maurya has created a scientific process to conducting customer interviews which allows you to take a more clinical view. He also advises ways to get maximum learning from the experience, ensuring that you are getting real, actionable, information you can translate into a successful product. For example, he states you should never do surveys or focus groups:
When asked to do the smallest thing to learn from customers, many founders’ first instinct is to conduct a bunch of surveys or focus groups. While running surveys and focus groups may seem more efficient than interviewing customers, starting there is usually a bad idea. Here’s why: surveys assume you know the right questions to ask. It is hard, if not impossible, to script a survey that hits all the right questions to ask, because you don’t yet know what those questions are. During a customer interview, you can ask for clarification and explore areas outside your initial understanding. Customer interviews are about exploring what you don’t know you don’t know. Worse, surveys assume you know the right answers, too. In a survey, not only do you have to ask the right questions, but you also have to provide the customer with the right choice of answers. When taking a survey, how many times has your best answer been “Other”? The best initial learning comes from “open-ended” questions. You can’t see the customer during a survey. Body language cues are as much an indicator of Problem/Solution Fit as the answers themselves.
Incidentally, reading body language is a huge element to running an interview. Later on, Maurya emphasizes why:
It’s fairly common to find customers lying in interviews — sometimes out of politeness and sometimes because they really don’t know or don’t care enough. Your job shouldn’t be to call out their lies, but rather to find ways to validate what they say with what they do, preferably during the interview. For example, if a customer declares a problem as a must-have, probe deeper. Ask him how he solves the problem today. If he is doing nothing and still getting by, the problem may not be as acute. If, however, he is using a homegrown or competitor’s solution and he is not happy, that may be a problem worth solving. Another tactic is to use strong calls to action. If a customer says he would pay for your product, instead of getting just a verbal commitment, ask for an advance payment or partial payment and provide him with a money-back guarantee.
The idea of conducting one-to-one interviews may at first seem counter-intuitive. As a founder, your vision involves servicing thousands, if not millions of people. But if you don’t know your customers intimately, you are bound to create something that just does not suit their needs. By understanding how to leverage Maurya’s techniques, you not only save yourself time and money, but you are closer to getting real traction, the core of any successful company. You can find more details on his methods in his book Running Lean on Amazon.