Archive for the 'Customer Development' Category

Team/Market Fit is more important than Product/Market Fit

This New Year’s Eve, I’m resolving to work on the most important part of my own startup, the team. Specifically, I’m going to try as hard as possible to deserve to work with my co-founders, who are both more experienced and have a better understanding of technology than I can aspire to. But although I’ve heard a lot of common sense arguments about the importance of a good team, I find that a good deal of literature on the subject is easily misunderstood. I’m sure many people have read and agree with the most famous example of this. Marc Andreessen’s blog post is a fantastic discussion on the importance of a good market to the success of a startup. Marc correctly posits that a good team with a good product in a bad market will fail. He goes on to say explicitly that:

* When a great team meets a lousy market, market wins.
* When a lousy team meets a great market, market wins.
* When a great team meets a great market, something special happens.

I certainly don’t want to disagree with someone who is both smarter and more successful in business than I am. However, I would like to point out thought that this is not an excuse to hire poorly or devote anything less than 100% of your attention in the early months into developing a great team. After all, Marc’s analysis is based upon his definition of a team:

The caliber of a startup team can be defined as the suitability of the CEO, senior staff, engineers, and other key staff relative to the opportunity in front of them.

In other words, you can have a team well qualified to exploit pet robotic whales in the US, but still fail because the market for robo-pets is fairly poor in the US and robo-whales just aren’t that fun to play with. Marc is essentially arguing that the caliber of the team is context sensitive. A great team for a new electric car company is not the same as a great team for a media company. The skills sets are largely, if not entirely, distinct form one another. However, there is one skill that is necessary for every founding team, regardless of what industry they are in: HR. That is to say, every team needs to be able to strategically hire individuals well suited to the market opportunities and when the market opportunity is unclear, hire individuals well suited to discovering market opportunity.

Strategic Market Choice

There are entrepreneurs out there that hatch a genius idea fully formed like Aphrodite stepping out of her shell or Athena springing from Zeus’ head whole. Sadly, I’m not one of them and like many entrepreneurs out there, I work in a process of continual improvement and refinement. This might include subtle pivots or radically different strategies / products. Either way, I rely heavily on my co-founders to note when something isn’t working if I fail to realize it myself.

When I was a musician, I was always impressed by the number of go-it-alone musicians who managed to pack up their instruments and head out on the road by themselves with a beat up hatchback and no support whatsoever. They’d play coffee shops, clubs, and street corners equally. Never passing up a chance to pick up a fan at a subway stop. To go it alone is an admirable aspiration, and some greats like Ani DiFranco can take this path to success. I certainly can not. I’m more like the other 99.99% of people who need a helping hand of a bass player, drummer, or even just someone offering a place to crash every night. Those are the people who will be able to see int your own blind spot and point out when you’re wasting your time in glam rock when grunge is taking off. Other people are a critical part to every business, and even in the extreme go-it-alone movement you need to know who you can count on for a quick reality check and who you can’t.

In business, I’m similarly limited by the scope of my experience and learning, and in that, it’s rare for me to be in a position where I can explore a market opportunity single handed. I’m much more likely to get to the point of product / market fit if I have a small team of entrepreneurs with complimentary skill sets than if I just pick an opportunity and blindly try and build a team around it. I’d call this market / team fit.

Drafting the Market

Marc Andreesson has a significant advantage over the rest of us when it comes to his strategy. He is famous enough to attract the right people for whatever market he chooses to enter and he is wealthy enough to pay them. To anyone with such an advantage, it’s easy to see why market would trump team in importance. It’s also easy to see that a bad team in a good market ought to be able to use some of the market growth to start hiring a better team. Even more to the point, you could simply adopt a market drafter position, let someone else develop the market, and simple coast along with them. I should emphasize that in any of these cases, having a market as your primary driver is a very good strategy. It’s only when your resources are constrained that this strategy will fail every time.

It doesn’t matter one bit that the market for solar cells or innovative battery technology is booming in terms of my success in that market. I simply don’t have the resources to enter that market, no matter how good the market is or how prescient my market forecasts are. So here is one of Marc’s examples again:

* When a lousy team meets a great market, market wins.

Does this ring true? If what you mean by “lousy” is “barely competent” than it probably is true. Barely competent is enough to get a product out the door and a barely competent product is worth 1% of the market. If you’ve got a trillion dollar market, you can retire on 1% or even 0.01%. But if by “lousy” you mean “can’t tie their shoelaces incompetent,” well… the market can’t win when the team fails.

As an entrepreneur he has a vast amount of experience in this and his opinion should be taken very seriously. However, Marc’s personal experience gives him a sample of startups which succeeded enough to be noticed by him. That is to say, they got out of the door and to the races. His perception of lousy teams is skewed to exclude those teams which were incapable of entering the market in the first place. In other words, his “lousy” team is still pretty decent. In the big world of 750,000 entrepreneurial ventures started each year in the US, a great number of them fail before they’re able to even get to market due to an inability to put together a sufficient team.

Build a Team of Explorers

I would argue that having a great team of entrepreneurs is a necessary, but not sufficient, condition for success. Furthermore, a great team will actively explore market opportunities and self select themselves out of the wrong market. Put another way, the right team in the wrong market will change markets. The wrong team in the right market may just bludgeon itself with a bad strategy and be dominated by a stronger competitor.

As someone who needs teammates with complimentary skills sets, I can only tell you that I have to build or join a great team to find success. I simply have no other option. I try and find other entrepreneurs who I can learn from, respect, and support. Given a team of those individuals, I feel assured of success. Perhaps not success in the same market I originally planned on, but a success I can be proud to be a part of.

So I’m left with the final editors comment from Marc’s post:

why can’t you count on on a great team to build the right product and find the right market?

I’m still waiting for the answer to this question. I haven’t read everything out there so it may very well be in another of Marc’s posts, or perhaps another blog, but I think it’s a valuable question to pursue.

Happy New Year!
Tristan

StartUp SF v2.2 – “Give Your Ideas Ex-Lax” with David Weekly

On Wednesday I went to see David Weekly speak at StartUp SF v2.2 – “Give Your Ideas Ex-Lax”. I’d heard a shorter version before at Startup Weekend, but I was glad to see it again and hear the full version. I largely agree with the ideas behind it, which David shares with Eric Ries, Steve Blank and others, but it does raise a question I wish I had some statistics on.

Does getting ideas out the door faster increase the overall success rate of ideas? Or do you just have more chances at getting it right?

Although I’m following customer development methodology and I have a gut feeling that my odds of success are better for it, I’m a bit surprised that there aren’t any statistical survey’s backing it up. Perhaps there are, and I just don’t know. (In which case, please send a URL over in the comments.) The anecdotal evidence is very strong, but they’re still just anecdotes. It seems as if the Malcolm Gladwell method of argumentation by quirkiness and common sense has become quite pervasive, or perhaps it’s not a new thing. (After all, I’ve been out of the country for a few years.)

So here’s my rational for pressing on (and here’s hoping it’s not a rationalization.) Even if customer development doesn’t give you a better chance of success, it gives you more chances. So hunt with a shotgun and not a sniper rifle.

If you’ve got an idea for a product and it’ll cost you 6 months of your life to get it out the door with a 50% of success and your time is worth $10k a month in opportunity costs in consulting opportunities. So the return better be at least >$120k to be worth doing (return should be > [10k/month x 6 months] / 50%). If you can do a stripped down version of the same product in one month, it’s much better to do so, even if the likelihood of success decreases to 10% (return should be > [10k/month x 1 months] / 10%). Plus, you’ll have five more chances of hitting a really big idea so you can retire to that private island you’ve been shopping for.

Obviously that equation is unrealistically simple, but the principle is the same. I’d rather have 6 lottery tickets than one, and the if you follow a soft launch methodology, odds are that your early adopters won’t care about a few bugs enough for it to sink your idea and the potential return is still the same. So in the end, customer development methodology ought to win out by virtue of having more chances. But I still wish there were a few more facts available.

Note from SV New Tech Meetup

This evening I went to the SV New Tech meetup in Palo Alto, CA hosted by Vincent Lauria and was again impressed at the release early, release often mentality that pervades Silicon Valley. But since enough has been written about the theory and execution of lean startups, I thought I’d mentioned an application which I don’t know has been tried: Music.

I’ve played music since I was four years old and played in more than one band. Actually I’ve released more than one album to the deafening silence of no audience, so I have to wonder if the lean startup / customer development methodology could help aspiring musicians. But more importantly, would any musician dare to try it?

Most people go into music “for the art,” which is code for “I don’t want to admit that I’m a narcissist looking for attention and sex.” They come with the inviolate idea that this is “my” music and it’s an expression of “my” personality which is not open to compromise and certainly not open to being influence by the audience. In doing so, they often sign themselves up for years of self-flagellation as they play to spartan rooms of only the bestest of friends who can stand to see them play for the 30th time this year. Sounding bitter yet? Don’t worry, I loved it and would do it again, probably in the same way.

But still, is there really just one way musicians can express themselves musically and get creative satisfaction from it? Most musicians loves a number of different genres and will play in a number of different bands. We all have different facets that we can display to the audience, whether it’s a polka, swing tune, or death metal march. So why do we pretend it’s any different than starting a business or developing the next big software startup? If a front-end web developer announced that they wouldn’t make the signup button bigger because it clashed with their artistic expression of their soul, it would be laughable. So why not with music?

As I mentioned, no one gets up on stage without an implicit desire to be seen, so let’s be realistic about it and listen to the audience. As with software startups, have a soft launch and see what styles of music work for you. Don’t worry about a few wrong chords, is there a market for this music/product? Do you have product/market fit? If not, time to find a new product, or start shopping your product for a new market.

I think a good twenty pages could be written on how to apply lean startup methodology to bands, but I’ll leave that for others to write. But one last thing, what type of bands do you think have the highest success rate? My guess is cover bands. Not because they’re tapping into a pre-existing market as a low cost competitor (although that certainly helps). Many cover bands take their built in audience and then branch into their own material, testing it in front of a live audience of their target customers and seeing what works. Huh…sounds like customer validation to me.

Cheers,

Tristan Kromer


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Author

Tristan Kromer's Profile Pic

Tristan is an entrepreneur that loves solving problems and getting his hands dirty. He manages the primary business functions of startupSQUARE.com and is strongly committed to the customer development process. An entrepreneur at heart, he has been involved in a variety of ventures for the past 13 years including IT security, music, real estate, and marketing. His most recent position was working as the General Manager of SECUDE International LLC in Ho Chi Minh City, Vietnam. Tristan will gladly play you a game of chess.