I Ain’t Buying What You’re Selling
The Customer Development Process
I’ve spent most of my career working in one of the most challenging environments to build and grow businesses in. I use my financial qualification and real world experience to lead teams and enterprises on the path to success.
But I also know enough to know I don’ t have all the answers — sometimes it’s good to get a different perspective.
Recently, I was asked for my opinion on the plethora of ‘startup methodologies’ out there and what rang true to me having managed to refocus from the very archaic world of manufacturing I had been operating in out in Papua New Guinea, to the heart of tech in London; and the reality is that I was spoilt for choice.
Having recently dipped into it again, steve blank and Bob Dorf’s Customer Development process as articulated in The Startup Owners Manual just did it for me, because it is the font from where all else flows. It sits at the centre of startup thinking, and impacts the way we think about businesses in the post industrial world.
But it is equally as applicable to any business at any point on its life cycle and certainly just as valid for some of the manufacturing operations I’ve had the privilege of working with in the past.
There are 14 steps to the Customer Development method — so much has already been written about them that I’m not intending to do more than give you a flavour of a few that really call out to me and my personal take on what they mean.
There Are No Facts Inside Your Building, So Get Outside
Unless you’re making something someone wants, you’re just wasting time. I used to make furniture for a living, I could develop, design and build whatever I wanted to (within reason).
But imagine I made a mattress from cactus thorns or a 20 foot high sofa — do you think anyone would be interested in buying them?
Steve and Bob’s call to ‘get outside’ is about talking to real life people and customers, understanding their requirements and constantly feeding that back into your business.
Too many businesses build what they want to build, what they want to give to their customer, instead of going out and figuring out what it is that their customers need.
Failure is an Integral Part of the Search
Failure, in this context, does not mean ‘not succeeding’, it isn’t about losing your shirt, or screwing up. It’s about finding out things, building on them, getting them wrong but just as importantly learning from what went wrong and taking action.
In a manufacturing context, failure (and learning from it) may mean getting tolerances corrected or ensuring that the right Pantone number is used, in technology and in early stage businesses, it may fundamentally change what it is your business does.
I’m a firm believer in continuous learning, startups haven’t worked out all the kinks yet, every rejection, every comment, every criticism is an opportunity to learn.
When a startup stops failing, it means one of two things, it’s either dead in the water or it has found its groove.
Startup Metrics Differ from those in Existing Companies
You know, I struggled with this when I first came across it. Especially as (as I have written in a previous post) I find it frustrating when business leaders don’t understand their financials.
It also felt like a bit of a smack in the face to all the time spent studying back in the day to get through my qualifications (and the ongoing time to make sure I keep up to speed!) But when I gave it some thought, I realised that I had been doing this all my working life.
Out in Papua New Guinea, I may have measured material consumption, or on time delivery, or units output on top of the normal financial information. The point being that these added value to the financials (from which I could spot underlying trends or discrepancies) and value to the decisions we took.
For a business at the start of its life cycle, the financials have less meaning because there is nothing to compare them to, no trend data to provide a benchmark for analysis.
So entrepreneurs have to choose something meaningful to measure. Customer retention, how much it costs to win a customer in the first place, life time value and more.
But whether an established business or a startup, the most important metric any enterprise should keep an eye on, is cash. Cash, cash, cash, cash, cash.
It’s what you’ve got, what you’re owed, what you owe and how long it’s all gong to last you.
Fast, Fearless Decision-Making, Cycle Time, Speed and Tempo
I’ve seen dysfunctional decisions made, I’ve seen the right decision made, I’ve seen lots of wrong decisions made, but the worst kind of decision? That’s the one that is never made at all.
Cash doesn’t sit still, it keeps walking out of the door, the longer it takes to make a decision, the less chance there is of it having the intended impact. There is no perfect answer, only taking the learning from previous setbacks and validations and iterating quickly.
For me, one of the most important parts of decision making is communication, accountability and ownership. That does not mean knowing who to blame if something goes wrong, it means making sure that everyone knows what part they need to play in the decision and its execution, and making sure that it is, indeed, executed.
Oh — and if you don’t have data to back the decision, look harder!
Preserve Cash All Cash Until Needed. Then Spend.
When you have limited funds, where you spend it makes a difference.
So if you can help it, don’t spend it.
I’ve seen (and stopped when I’ve caught it early enough) business leaders throw money into projects or campaigns that had no value to the business and were a huge drain on resources without leading to any better learning for them or the business.
Keep tight control over your cash so that you can push it into growing your business the right way when you find the business model that works.
Communicate and Share Learning
I have a bit of a bee in my bonnet about this. If you are building a business the right way, it should not consist of islands or empires, little hubs of knowledge with a gatekeeper.
It should not be about control or protecting departments, budgets or positions.
If as a leader, you share your insights and your learning with your team — and I hope you’ve hired the right team of course — then the ability for your business to increase its chances of survival grows exponentially.
Not only do you get the chance to glean different perspectives from highly astute leaders in their own fields, but it also gives them ownership and buy in to the vision you’re trying to build.
Customer Development requires everyone to be on board — that’s what rule 14 of the manifesto is all about.
And the rules aren’t meant to be followed doggedly, they’re there to guide startups (and other businesses) at the relevant stage of their growth. Coming back to them again and again as the business faces different challenges.
As a CFO, it’s often my job to balance the demands of the business and to make sure that we’re on the right path to profitability and growth and that we’re not mis-allocating resources (cash) along the way.
But ultimately, without customers — there is no business!