Solving customer’s burning needs
Based on my personal experiences, I wrote about solving customer’s burning needs, which is vital for B2B startups to achieve product-market fit.
Hi, I’m Ryo(ri-yo), co-founder and CEO of Autify. Autify is an AI-based no-code software testing automation platform. With Autify, anyone can easily automate E2E testing, run them on any major PC browsers as well as smartphone browsers, then AI maintains automated testing scenarios based on your source code changes. Before starting Autify, I worked as a software engineer for 10+ years in 3 countries, Japan, Singapore and U.S.(San Francisco).
In February 2019, Autify was the first Japanese team to graduate from the Alchemist Accelerator. Using my experience in the program, I wrote this article about how solving customer’s burning needs is indispensable for B2B startups to achieve product-market fit.
I hope that technical founders and B2B SaaS founders will learn from the mistakes I discuss in this post, as well as the process I took to discovering my customer’s burning needs and how I arrived at the product, Autify.
※ I don’t know much about B2C so some of these tips might not apply to B2C businesses.
As I mentioned before, we were the first Japanese team to graduate from the Alchemist Accelerator, one of the top U.S. startup accelerator programs. Having raised $2.5 million in a seed round in October 2019, we are taking on more members and our customer numbers are growing. It may seem that the wind is in our sails, but the two years since the founding of my company until the development of Autify were a hellish time of obscurity in which we pivoted countless times.
The Alchemist Accelerator program helped drag us out of that hellish time by teaching us one specific piece of advice, find your customer’s burning needs.
What are burning needs?
Perhaps some of you have not heard of the concept of burning needs.
As you can see in this picture, a burning need is an issue analogous to the urgent need to extinguish the flames if your hair was on fire. In general, companies will only spend money to solve pressing issues such as this.
Companies make harsh judgments about whether or not a product solves their problems, especially with B2B. Companies won’t pay a single cent for a nebulous product that would be merely nice to have.
B2B products that sell well
What kind of products sell well? With B2B, there are essentially only two types of products that sell.
- A product that increases a customer’s profits.
- 2. A product that reduces a customer’s costs.
The larger the company the more emphasis they place upon ROI. Any product that cannot be justified with either of these two points would be quite difficult to sell. At the very least, people such as myself with a technical background and no professional experience in sales don’t have the skills required to sell such products.
So where do highly-used products from Slack and Atlassian fit into this picture?
Common misconceptions made by B2B SaaS startups
In essence, this is the concept that B2B SaaS companies only succeed via one of two patterns: either by selling a product with a low unit price to a huge number of companies or by selling an expensive product to a limited number of companies.
Products that we often see in our daily lives, such as Slack and Atlassian, fall into the former category. This space is extremely challenging as it lends itself to winner-takes-all. The strategies in this space are somewhat similar to B2C in that they rely upon strong marketing and limited direct sales with onboarding taking place within the product, meaning that questions of lowering costs and increasing profits hardly ever arise directly.
You must keep in mind that, in most cases, starting a B2B SaaS with the former strategy hardly ever goes well. In a winner-takes-all world, you can’t earn enough revenue with a product that cannot capture a decent share of the global market for a monthly fee of a few dozens of dollars.
A product that the founder can’t sell won’t sell at all
When I started the company, I had an image of a product like Atlassian. I imagined that as long as it was a good product, had credit card payment capability, included a free trial period and was launched on ProductHunt then it would naturally sell itself!
In many cases, this is a complete fantasy.
This is a similar idea to an unpopular musician saying “a good song sells itself.” You should dispel this misconception as soon as possible. Overnight success stories like “The Social Network” likely won’t happen to you.
We were often told at Alchemist that if the founder couldn’t sell the product, then it wouldn’t sell at all. Until then I had thought that, “I’m an engineer and not great at sales, therefore if the product takes off, I will hire a sales professional to sell the product better than I could.”
However, the Alchemist program began with sales. We sent countless cold emails to get appointments. Because of that, my classmates were racking up sale after sale so it was clear that if I didn’t start doing the same, we wouldn’t be able to graduate from the program. This shift in my consciousness toward becoming a salesperson was definitely a major turning point.
No matter what you are — engineer or otherwise — if as the founder you don’t spend a lot of time on sales, then success will elude you.
Talk to your customers
Before arriving at Autify, I worked on a lot of products. The biggest failure in all of these products was building them on day one. As an engineer, I was able to start building a product right after I felt I had a good idea. However, I ended up expending a large amount of time on a product that did not actually sell.
Now I think the main reason that startups don’t succeed is that they keep building products that do not solve burning needs. You need to start by identifying the burning needs of your customers before building the product.
At the beginning of the Alchemist program, we were developing another product related to software testing. I spoke with many companies in the process of selling this product and everyone reacted in the following way:
This is a great idea. Let me know once the product is finished as we’d like to try it out.
These responses gave me the impression that the product won’t sell until it is developed further. However, I was completely mistaken. Products that receive this kind of response most likely don’t solve the customer’s burning needs. How can you say this? Because they didn’t want the product immediately.
In other words, the product likely won’t even sell once it is fully built.
How to identify burning needs
In the first three months of the six-month Alchemist program, I gave my sales pitch to around 100 companies, with most responding in the way that I described above. I was really feeling the pressure. If I couldn’t sell the product then we wouldn’t graduate from the program.
I’d come to understand that the product wasn’t solving a burning need, but I had no idea what to do next. But I remembered that I had taken notes at my sales pitch to 100 companies.
The answer must be in the notes!
By going through the notes, I picked problems that the customers were facing and put them together in an Airtable sheet. Then I sorted the problems by the number of times that they were mentioned. At that point, I started seeing common problems mentioned by most of the companies.
As I went from company to company doing my sales pitch, I was always preoccupied with my impression of the most recent meeting. However, by summarizing results in a sheet and taking an overall perspective, I was able to come up with the answer.
I discovered there were two common problems. The first was that they don’t have enough engineering resources to move the testing automation forward. The second was that even after automating their tests, they are required to spend many hours of maintenance because their application’s UI changes frequently and that breaks the automation script.
Get contracts without a product
Surprisingly, over 80% of companies I talked to referred to the same problems. It was clear that if we could solve those problems, we would have a huge business on our hands. So I rethought about the product from scratch and came up with the following two solutions.
- With a system that records test operations, automation could be easily achieved even by non-engineers.
- Time-consuming maintenance is handled by AI.
I rebuilt my presentation based upon these points, made a very simple prototype and recorded a video in a night.
The following day I brought the presentation to a client then the response was completely different from before. Despite the product not existing yet, the company offered to buy it! Once you identify a customer’s burning needs and offer the solutions to them, the client reacts in this way.
Because their hair is on fire and they need to put out the fire ASAP, this reaction is totally natural.
Criteria for product-market fit
One of the frequently asked questions among startups is “how to measure the product-market fit”. I also had no idea how to measure it during my struggle in the first 2 years of the foundation.
Peter Reinhardt, the founder of Segment, said in this lecture that if you achieve product-market fit you will definitely know. The first time I listened to this lecture, I didn’t understand it at all, but now I do. The world has completely changed after we identified the burning needs and provided appropriate solutions.
First, we received demo requests from a number of large well-known enterprises without any marketing activities. With our previous products, demo requests always came from personal email addresses and even worse we were sent a ton of spam emails. We were surprised at the overwhelming shift in the quality of leads and at the dramatic difference in how the world reacted.
Moreover, customers began telling us exactly what we need to do to grow the business.
For example, our customers started telling us new features to develop. Previously, We had developed products based upon hypotheses about what features would lead to more usage. However, now we know for sure that if several customers give us the same request then that feature is required and we prioritize the implementation of that functionality. We no longer develop features with hypotheses and now are able to develop only truly necessary ones.
Our customers even started telling us price points they’d pay. By honestly asking customers their price point, we are now able to clearly set the price. In our case, because our product is compared to the labor cost of testers, it definitely sells if a customer feels it is cheaper than the costs. Also now that I have a sense of the budget range based on the size of the customer’s company, I am able to create pricing plans that fit into the size.
Lastly, our customers have started to inform our hiring. Although customers won’t directly tell us this, by looking at the daily operation, we can see what could be a bottleneck for satisfying the customers once we scale. Therefore, now we know where we need to hire people to fill the gaps in advance.
Solving the customer’s burning needs
Until this point, it felt as if we were trying to push an immovable heavy rock up a hill. We couldn’t see a way forward but also couldn’t go back. However, once we identified the customer’s burning needs and provided solutions, it suddenly felt as if the rock was rolling downhill. It was as if we had to rush ahead of the rock and adjust it’s trajectory before it would roll in another direction.
I would recommend the following to B2B startups who are seeking a product-market fit:
- Stop writing code right away and focus all your energy on identifying your customer’s burning needs.
- Set out solutions to the identified burning needs that are several times better than the existing solutions.
- Put the product idea for these solutions in your presentation and start selling it.
- Secure some contracts before you begin product development. If you pitch to several companies without securing a contract and keep getting responses like I described above, go back to the first step and start over.
- Develop the product at top speed.
In my next post, I’ll write about a framework for early stage B2B startups to achieve product market fit that is based on my experience with Autify.
Without solving burning needs, you won’t find success.
