The Mom Test – Or Why Startups as the Wrong Questions

The Mom Test

You know, entrepreneurship is a bit like riding a bike.   People can tell you how to do it till they’re blue in the face, but it’s not until you actually do it yourself that you really understand how it works.  And it’s a bit like that with a startup, except in this case it’s about understanding customer needs.  Or how time, money and risk work together.  Or sales and marketing.

I get to talk to a lot of early stage startups these days, many of who are yet to make a sale.  It’s an exciting and testing time in a startup’s journey, but it’s also the place where a lot of mistakes can be made which are really hard to undo later.

In all my discussions there has been something nagging me about the feedback founders are getting from a range of people – friends, associates and sometimes even customers.  They are almost universally being told that their ideas are great.  Fantastic.  Awesome!  Definitely something that they’d buy!

I’ve had lots of these sorts of discussions myself.  In fact, I’ve had conversations with people where I have had a product in my hand – literally – as someone has said, “my dad/uncle/mate could really use one of those.  What’s the website?”.  And guess what – despite the enthusiasm in my presence not one of them has followed through and actually bought one.

So I was seeing a pattern, and knew it was a problem, but couldn’t really put my finger on why.  I mean, it’s great to hear that startups are getting positive feedback from their potential customers.  And getting positive feedback from your friends, family and associates helps keep the enthusiasm going when times inevitably get tough.

But it’s bad news in the long run.  Because a lot of those startups will end up facing the same problem I’ve had – everyone is telling them that their idea is fab, but no one is buying it!  Easy to fix really, spend more time, energy and money on marketing.  Run harder.  Do more.  That’ll fix the problem.

If only that were the answer.

The problem of course is that in these situations, startup founders are getting ‘false positives’ out of these conversations.  What’s really happening is that they are framing the conversation along the lines of ‘I’ve got a startup, it’s based on a great idea that does X.  What do you think?’

Well, most startups have interesting ideas, and it’s hard not to be infected by the founder’s enthusiasm.  Those startup ideas are new – otherwise they probably wouldn’t be a ‘startup’, but instead a small business – and the founder is really passionate and committed.  So what’s not to like?  Would you buy one? Absolutely!

Really?  Really…?

Probably not.

This all came together for me a couple of weeks ago when I stumbled across a short book called The Mom Test, by Rob Fitz.  I’ll reproduce one of the opening Mom Test conversations here, because it illustrates the source of the problem many founders get themselves into.  In this case, the conversation revolves around an idea for a digital cookbook for the iPad.

Son: “Mom, mom, I have an idea for a business – can I run it by you?” I am about to expose my ego – please don’t hurt my feelings.

Mom: “Of course dear.” You are my only son and I am ready to lie to protect you.

Son: “You like your iPad, right?  You use it a lot?”

Mom: “Yes.” You led me to this answer, so there you go.

Son: “OK, so would you ever buy an app which was like a cookbook for your iPad?” I am optimistically asking you a hypothetical question and you know what I want you to say.

Mom: “Hmmm.” As if I need another cookbook at my age.

Son: “And it only costs $40 – that’s cheaper than those hardcovers on your shelf.” I’m going to skip that lukewarm signal and tell you more about my idea.

Mom “Well…” Aren’t all apps meant to cost a dollar?

Son: “And you can share recipes with your friends, and there’s an iPhone app which is your shopping list.  And videos of that celebrity chef you love.” Please just say “yes”.  I will not leave you alone until you do.

Mom: “Oh well, yes honey, that sounds amazing.  And you’re right, $40 is a good deal.  Will it have pictures of the recipes?”  I have rationalized the price outside of a real purchase decision, made a non-committal complement , and offered a feature request to appear engaged.

Son: “Yes, definitely. Thanks mom – love you!” I have completely misinterpreted this conversation and taken it as validation.

Mom: “Won’t you have some lasagna?” I am concerned that you won’t be able to find food soon.  Please eat something.

OK, so maybe not every conversation is like this, but I can’t say I’ve ever heard a startup say something like “I spoke to this woman about my idea, and she said it was total crap”.  Particularly once real time and money has been laid down on the idea.

It might sound like this sort of conversation should never happen, but it does.  I’ve had them – lots of them – about my idea.  And the problem is that the longer you have these conversations the further down the path you go, and the harder it becomes to change course.  Which, tragically, often leads to failure.

So I guess I’ve become a ‘Mom Test Evangelist’ recently.  I’ve got my soapbox, and I stand on it and shout out about the Mom Test as often and as much as I can.  I carry a copy of the book with me everywhere, and push it to anyone who will listen.

Because it’s great to have self-affirming mom-like conversations with people, but it really doesn’t help you in the end.  You need to have conversations that will let you build something that people actually want – and you’ll never get to that point when you’re selling them your idea, rather than finding out what their problem is in the first place.

Accelerator, Boot Camp or Lean Launchpad?

  

I was lucky enough to get the chance to go through a ‘boot camp’ style startup program recently. A really great experience, and it means in the last 12 months, I’ve been intimately involved in a boot camp, an accelerator and a Lean Launchpad program. So…what’s the difference, and which one was the best?Well, that kind of depends. These programs are all quite different in intent and outcomes, although they are all designed to take an idea and move it quickly through to the point where the startup has a good (or at least better…) ‘product-market fit’. So in other words, to make sure they’re not wasting money developing something that no one wants!

And I have to say that I don’t know what the people that put these programs together intended to achieve, I can only say what my experience was. And of course, they might be totally different things.

So! Here we go.

Program No 1 – the Lean Launchpad

I was involved with a university led Lean Launchpad program for an Australian research organisation (the CSIRO). In this case I was a mentor for several of the teams.

The great thing that the Lean Launchpad program had going for it was structure. The format that Steve Blank has created for this program really drives that product-market fit thing. There was a strong emphasis on customer interviews – the more the better, and no week could pass without showing progress. 

This led one of my teams to change their target market three times, and they hadn’t arrived at one that worked! How good is that? No time or money wasted building an idea for a market that didn’t want it! And even better, they saw a failure to find a suitable market as a success! Again, no wasted time or money going down the rabbit hole.

What the program didn’t do was really help develop a suitable business model – although that was an issue created by time, not the program; there’s only so much you can achieve until the teams nail that product-market fit.

As an aside, the next step for CSIRO was to put some of the teams through an accelerator, so that gives you an idea of where Lean Launchpad and accelerators fit together.

Program No 2 – Accelerator

The second program I’ve been involved with was an accelerator, again as a mentor. Now in contrast to the Lean Launchpad, this program ran for longer, and required a greater commitment from the startup teams. It provided a much deeper educational and mentoring experience and allowed for more in-depth mentoring and support.

So, my key observations on the accelerator was that it turned out more rounded teams. They pitched at the end and presented solid pictures of their ideas and how they would exploit them. There was an emphasis on hardware based startups in this accelerator, so while the teams also showed some great advances in their hardware design, the iteration process happens a little more slowly than for pure digital startups.

There was also funding involved for the teams, so that changed what they could do – including obtaining patent protection for their ideas.

It also incorporated customer interview work, but it wasn’t the focus of the program. 

Program No 3 – Boot Camp

The third program I’ve been involved in was a boot camp, but this time as a participant.

To some extent, my experience of this was coloured by the fact that my startup (‘WineMinder’) was already on market. So a lot of the boot camp activities forced me to refocus, rather than reinvent.

However, the boot camp was a much shorter and more intense process that the Launchpad or Accelerator programs. The final outcome was a competitive pitch, so while there was some customer discovery work, given the timeframe most of the effort went into filling any gaps in the business model. That ranged from basic market research (how big is the market), to who is the customer (product-market fit) and pitch training.

So my key takeaway from the Boot Camp was that you can achieve a lot in a short period of time, but it’s probably most useful very early in the process. A bit like the Launchpad, but with a sharper emphasis on getting a pitch together, rather than a better formed view of an idea prior to more development in an accelerator or even a Launchpad program.

So what does all that mean?

Well, which program suits a startup depends where it is in its development. Lean Launchpad is great when you’re early in the process and need to ‘get out of the building’ to talk to customers. Don’t do that, and you’ll get hammered in a Launchpad program! Boot Camps are probably better when you have done some of that work and need to rapidly prepare for a pitching opportunity. And an accelerator is better when your idea is relatively well formed and you need to literally accelerate your business to being on market.

However… Some more general observations are these;

  • All these programs are good; if you have a startup and get a chance to participate in any of them, do it!
  • If you do, leverage them as hard as you possibly can. Make contacts, challenge the mentors in the program to add value (because they should be challenging you!). It’s really unusually in business to get free access to such a range of capable, busy people. Make the most of your time there!
  • The key to any of these programs is structure, structure, structure. Startups need to move quickly from where they are to somewhere else – and structure provides the – well – structure to get there! Programs without a formal structure are likely to deliver lesser outcomes (in my opinion).
  • If you are lucky enough to have a choice, other than structure, look to the people involved. Their experience will tell you what you might get out of the program outside of the structure, and that can be as important, if not more, than the structure itself.

So did all these help me? Absolutely! You can read all the books you like, but there’s no substitute for experience. I’ve done lots of the former, and now some of the latter. I like all these programs, and they’ve all been run by great people. 

If you’re in the mind to create a startup, find you way into one of these programs if you can. There’s never been a better time, so take the plunge, and good luck if you do!

Three things I learned about innovation in 2015

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Like lots of people these days, I do lots of ‘stuff’ in the innovation space.  This year in particular has been interesting, not only for the momentum that has built behind innovation and entrepreneurship in Australia, but because I’ve had a window into lots of different innovation activities.  So what have I been up to, and what have I learned from all this?

Well, to start out, here’s some of the things I’ve been up to this year;

  • Mentoring in a Lean Launchpad program, run by the University of Queensland (UQ) for Australia’s CSIRO
  • Kicking off my own startup, and bringing its first product to market, ‘WineMinder’
  • Running a successful Kickstarter campaign for WineMinder
  • Lecturing in entrepreneurship at the University of Queensland
  • Being engaged as the Queensland University of Technology’s inaugural “Entrepreneur in Residence” (EIR)

So a pretty broad range of activity, really.  I could probably write pages on some of the things I’ve learned from all that, but I’ll cut straight to the chase with the three biggest things that come to mind…

There’s no lack of good ideas out there, and technical innovation doesn’t seem to be a problem.  The real challenge is wrapping a strong business case around the idea and executing on that.

There were over 20 teams in the UQ subject, 7 in the QUT accelerator and 8 at the CSIRO, all of whom were trying bring a new idea to market.  Common across all of these was a fantastic ability to come up with great ideas twinned with a vision of how they could make a difference.  More challenging was taking those ideas and building strong business models around them, including thinking through the detail of how the model would be executed.  When assessing the UQ student business cases, the ones that got me excited were those that dove into the detail of their idea and how it would come to market – detailed cost estimates, channels to market, critical partnerships and realistic time frames. Sure, a lot of that is likely to proven wrong, but the fact that the teams could get to that level of thinking along with coming up with a good idea meant that there would be far fewer surprises in store, and that’s a good thing!

Crowdfunding is easier than I thought!

Running a Kickstarter campaign was a lot of fun, and a lot easier than I thought.  Most of the things that consume time I was doing for the WineMinder business anyway.  And sure, I had to harass some people at the end to get them to pledge, but on the whole it was pretty straight forward.  Now we didn’t raise a huge amount, so that will have influenced the experience for me.  But there are a whole stack of benefits to crowdfunding other than cash, including;

  • Increased brand awareness; the sort startups would struggle to buy
  • Potential investor interest (we had two inquiries for investment during the campaign)
  • It really tests out your idea and your product pricing, as well as providing strong market validation of the idea

As a result, I’d do it again, but prepare my audience much earlier to drive support when the time comes to launch a campaign.

It needs to look like a duck

This one is interesting.  A whole culture has developed around startups, including things like lean startup processes and the associated MVP, pivoting, and a ‘standard’ way of doing things.  I briefly dipped my toe into the water of raising funding, and what I saw there was that things need to ‘look like a duck’ or investors can take a dim view of your startup.

Now, not every startup is the same.  For example, given where the three of us who developed WineMinder are in our careers, it has frequently been cheaper for us to outsource elements of our development than to do it ourselves – we would simply lose money by doing it that way!  However, some investors don’t like that, they want you fully committed, doing all the work for sweat equity.  That’s cool if you’re just out of school, but for mid career professionals, not so much.  It has to be an effective business, so sometimes you need to take a different path to the ‘standard’ one.

Orthodoxy constrains innovation, right?  So it goes for startup processes – they improve success rates (or they should, otherwise why do it?) but constrain innovation in producing the next (better) phase of startup development.   Use processes flexibly and assess startups on their merits and both individual startups and the processes that births them will improve over time.

I’ve learned a lot of other things through the year, but there are the three that stand out for me.  I love what’s going on in the space, and I see a lot of people keen to make the jump into an entrepreneurial venture.  Australia is slowing starting to leverage the great ideas that will form the businesses of the future, and I’m looking forward to using what I’ve learned in 2015 to make a contribution to that in 2016!

Help! My startup’s not disruptive!!!

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It’s terrible, tragic even.  My startup’s not disruptive!  It won’t change the world, or even an industry.  It won’t lay waste to the antiquated detritus of 20th century business, even by accident.  What am I to do???

Ok, that’s a bit tongue in cheek, but as you can appreciate, the impact of companies like Uber, Airbnb and even Apple can make it look like disruption is an indispensable part of the new economy.  Disrupt or perish, right?

In my view, a lot of what gets thrown up as being disruptive is nothing of the sort.  If you take Clayton Christensen’s’ original work on the subject, you can mount an argument that disruption can’t be planned anyway, so why bother?  It’s a serendipitous outcome of an innovation, not something that can be planned in advance.  No one is prepared for disruptive innovation; if they were, it wouldn’t be disruptive, right?

One of the reasons that disruptive innovation is such an influential idea is that it suggests that there’s a shortcut.  A shortcut to massive growth that avoids the need to carefully plan and execute a business idea over a long period of time.  Who wants to spend 30 years building a successful business when disruption offers the change to do it in five?  It gets around the pesky issue of eking out progressively larger market share based on well-honed strategy, tight cost control and incremental product development.

And of course, it’s even more appealing in the startup space.  Want to compete with Microsoft?  Hell no, we’ll just disrupt them!

But of course, disruption has become part of the new orthodoxy.  If you’re not disruptive or not aiming to be, you just don’t fit in quite as well as you might have in the past.  Want investment for your startup?  Be disruptive!

If you’re not disruptive, it makes it just that little bit harder to obtain capital then if you are, because most early stage investors want high returns in relatively short periods.  That doesn’t mean that non-disruptive startup don’t get funded, but it’s a lot easier to make the case for rapid profit if you can grow unencumbered by traditional market completion.

I’m a bit of a contrarian at heart, so I tend to recoil from the hype surrounding disruption.  But I think it’s important to remember that there are lots and lots of very successful businesses out there that aren’t disruptive and never will be.

There was a good article in Harvard Business Review last year that made just this point.  The author pointed out that “the vast majority of profit from innovation does not come from the initial disruption; it comes from the stream of routine, or sustaining, innovations that accumulate for years (sometimes decades) afterward”.  As a case in point he offers Intel, who has made about $287 billion from the series of chips that built on the original X386 chip introduced in 1985.  Not bad for a non-disruptive business, huh?  Then there is Microsoft with Windows ($325 billion) and even Apple with the iPhone ($150 billion).

I also read a piece recently (also from HBR) which talked about why bootstrapping a startup is the most successful approach to a new business in terms of raw numbers.  They criticise the ‘big money’ model that gets all the headlines for startups and point out that most of these business are better off taking it slowly – working out their business model, tuning their product to the market, and learning to get by on less, rather than more.  This article was published before the Innovator’s Dilemma, so you could argue that things have changed and maybe they have.  But I’d wager that the companies that will dominate the world in 20 years’ time are likely small and humble at the moment and will take all that time to ‘disrupt’ their competitors!

Returning to my own startup, what does this mean?  Having recently completed a modest Kickstarter campaign, we’ve been asking the question of ‘what’s next’?  One answer to this question is to ‘go big’ by raising money and taking the idea global.  That’s entirely possible, but some water needs to go under the bridge yet.

And of course, most people get the idea of what we’re doing with WineMinder, but it doesn’t immediately bring forth visions of global dominance.  Which makes it that little bit less attractive compared to rapidly scalable, potentially disruptive ideas.  And that just suits me fine, to be honest.  But occasionally it can make you wonder if its worth bothering with all the hard work and worry (and of course the fun and occasional euphoria!) if you’re not going to disrupt something – other than your family life and your bank account!

Again, being a contrarian, I wonder if a lot of profitable – but not disruptive – opportunities are being left unaddressed in the rush to creatively destroy the status quo.  And maybe my startup is in that space.  And if it is, I’ll gladly make decent returns on my efforts while watching some more disruptive ideas burn through other people’s money, before being disrupted by the next wave of, well, disruptive innovation!

In which case, I don’t really need help at all…at least, not because my startup isn’t disruptive!

Kickstarter success – what I learned!

Kickstarter

What I learned from my Kickstarter compaign

I recently completed a successful kickstarter campaign for a consumer electronics product called WineMinder (www.wineminder.com.au) and I think I’d have to say that I learnt a few things along the way!

Firstly, it’s incredibly rewarding to have your idea validated, and not just by people who know you and the project intimately.  That’s probably a given, but worth saying none the less!

More interestingly, there were a couple of unexpected outcomes from the campaign, which didn’t get much coverage in the Kickstarter guides and commentary that I looked at before launch. These were;

  • A massive increase in brand awareness.  Just going on website traffic alone, we had as much traffic to our site in the first day of the campaign as we had for the entire 3 months prior, and increased total new visitors to our site by a factor of 6!
  • We had two approaches for investment in the business and one from someone offering to be our agent in northern Europe.
  • Our top pledge was the biggest mover, even when it ran out and I created another, similar pledge for the same reward at a higher price level!

Many would argue that we could have found out this last point if we were following a lean startup process, but it hadn’t come up in any previous discussion – maybe because we hadn’t been forced to develop varying offers before the campaign.  So a lesson there is to get really creative with offerings, even if you are following a lean startup methodology.

Of course, many of the other things I learnt were much more commonly discussed, like;

  • The euphoria of the first day or two, where early pledges really get things going – followed by the nail chewing when this drops off temporarily!
  • The need to prepare early and well to make sure you hit your targets, because very few people are likely to stumble upon the project via the Kickstarter site itself.
  • The fact that you’ll spend the last week of the campaign mailing, texting and ringing people and just generally making a pain of yourself until all those people that said they’d pitch, get off their backsides and actually pledge!

I’d definitely do it again.  The funding we raised will be extremely useful, the brand awareness we’ve developed we simply couldn’t buy at this point and the validation of the product and insights into pricing structures was unbelievably valuable!

And, of course, it was just straight out fun!

My Start-up Journey – Episode II

Startup Journey

Last week I kicked off this series of blog entries about a start-up I’ve created with a co-founder. The idea is to share what I learn on the journey, but before I start doing that, I’ll provide some background to the venture.  That way, future blogs will make a little more sense.

The idea for the start up had been rattling around in my head for over 20 years. Or to be more precise, the problem that led to the start-up product had been rattling around in my head for 20 years.  What changed more recently was that all of a sudden the problem could be solved in a much more elegant way  than it could two decades ago. Back in the 1990s I had a hardware solution in mind, but it was clunky and only solved the problem indirectly.  However, last year I realized that I could solve it through a combination of hardware, software and some smart analytics, all wrapped up into a package that I think will solve the  same problem for other people as well.  And in fact, my rather unscientific survey of friends, associates and other random people suggests that not only is this the case, but the number of people for whom it may solve the problem is big enough to support a business – or start-up in the entrepreneurial vernacular.

So that’s a good start, yes?  A realizable idea and a target market that just might be interested enough to buy it in volumes that make it commercially viable. Cool!

That was the easy part thought, the ‘ideation’ as it were.  Given that I know very little about hardware, or software, but something about the analytics, I needed to find someone to help bring the idea to market.  This, then,  presented me with my first significant decision; whether to find a co-founder, or simply pay someone to do what needed to be done.  The problem, of course, is that I didn’t know what needed to be done, so it could end up being a very open check book indeed. So I went looking for a co-founder to share the load.

That wasn’t an easy process though.  When I first had the idea for the product, I was lucky enough to have some people around me who had the skills I needed to get the start-up off the ground.  But skills aren’t the only thing that a co-founder needs to bring to the table; they also need to bring some passion and drive to the endeavor, otherwise they’re not really a co-founder at all.  More like an unpaid employee.  And that’s where I started – with an unpaid employee as a co-founder. That wasn’t what i needed, so I went looking for another co-founder.  Some networking led me to a suitable candidate, this time with the skills and the enthusiasm, but not the time (despite what I thought was the obvious financial appeal of the venture).  So that partnership died before it started. Finally a friend pointed me to a mutual (although old and slightly tenuous) acquaintance.  But this time it stuck.  Skills + enthusiasm + time = co-founder! And away we go!

Getting back to some of the basics of the startup, what I can also tell you is that the product could be said to be part of the ‘internet of things’; that is, it uses a wireless sensor and some smart analytics to provide decision making information to the user in a way that simply hasn’t been possible in the past. That’s kind of cool, as it’s a product of the times.

The product also has a very niche market.  This makes the potential sales volumes relatively small (although there are a number of market or product extensions that can expand this) but large enough to create a break even volume relatively easily.  The upside of targeting a niche nature is that there is no similar product out there.  There’s lots of products that almost compete with it, but not quite.  So there’s some market building to be done, but that should be relatively easy (you’ll have to trust me on that for now).

Another consequence of the market size is that it’s no Nest we’re creating here. But all going well, it will be profitable and more importantly, provide a platform for bringing other products to market. This is an idea suggested to me by an adviser to the venture and I think it’s a good one.  The first product builds a partnership, along with trust, skills, capability and a supply chain that can be leveraged into other ideas in the future. That’s the reason for the start-up’s name – Smart Sensor Technologies.  The ambition is to keep the risk low by starting with a single product, and leveraging the success of that one into others.  No success, no other products.  Not shooting for the stars, but not a risk free adventure either!

Which leads me to the penultimate I want to make – that I am a highly pragmatic about managing risk.  I’m not a dreamer (I’m a 43 MBA/DBA educated civil engineer, in case you want to know, so I’m past wild dreams to some extent…) and while my skills and knowledge are pretty diverse, I also know what I don’t know.  Which makes me very focused on building partnerships that allocate tasks to the people best placed to execute them (or in contract jargon, passing risk to those people who are best placed to manage it).  This might reduce the portion of the pie that my co-founder and I can claim, but it dramatically increases the chances of success in my view.  In some respects, it’s the same philosophy that underpins the idea of ‘open innovation’; that is, ideas can come from anywhere and you don’t need to control them all yourself.  You’ll see this philosophy play out in all sorts of ways as this blog continues over time.

The last point I wanted to make in this post follows on from an awareness of what I don’t know (and the fact that I like to know as much about an undertaking as I can before embarking on it; go figure, I’m an engineer at heart…).  Based on this awareness and a general interest in innovation, I’m going to find and follow a road map.  At this stage, that road map is laid out in Steve Blank‘s Four Step to the Epiphany. It might not be the right map, or perhaps the best one, but it’s the one I’m going to use.  So lots of future blogs will reflect on what’s in that book and whether it’s been useful or not.  Hopefully that ties my own experience to that of others and might even provide some guidance to anyone thinking about the start-up journey themselves.  However, if you know of other, good road maps, let me know!

Till next time…