Musings of a Marketing Maven

Entre­pre­neurs and new prod­uct cham­pi­ons are always look­ing for the secret to mar­ket suc­cess. A pop­u­lar for­mula is to hire “ser­ial entre­pre­neurs” who’ve been suc­cess­ful before, assum­ing that suc­cess is trans­fer­able from one com­pany to another.

This can be risky. As one 8-time entre­pre­neur writes,

Since time immemo­r­ial a post mortem of a failed com­pany usu­ally includes, “I don’t under­stand what hap­pened. We did every­thing that worked in our last startup.” The fail­ure is not due to lack of energy, effort or pas­sion. [Steven Gary Blank, founder of E.piphany]

Too many peo­ple get (or take) credit for past suc­cesses, when often they were just lucky with mar­ket tim­ing. Dur­ing the wild rush to scale up the com­pany they were surf­ing the wave, too busy to pay atten­tion to why their com­pany or their prod­uct was so successful.

I often hear: “Can you rec­om­mend a super sales-and-marketing vet­eran (or team) who can jump-start our ini­tial sales and guar­an­tee early cus­tomer trac­tion?” “Do you know any [local] biz dev peo­ple with a proven track record in our indus­try, and a great set of contacts?”

Or, “How many peo­ple should we hire for our found­ing sales and mar­ket­ing team? What’s the right mix of on-board staff and part-time contractors?”

The Make-or-Break Ques­tions for Start-ups

While these are impor­tant ques­tions, the real bet-the-company dri­vers are:

• Who are our customers?
• What do they need that we are uniquely qual­i­fied to offer?
• Why will they buy our prod­ucts? How impor­tant will our prod­uct be to them?
• How much are they will­ing to pay? (And can we make money offer­ing this ser­vice at that price?)
• Given their pref­er­ences, what’s the right sales model? How, or through which chan­nels, do they want to buy? What do they expect or need in the way of sup­port — before, dur­ing, and after the sale?
• What’s the com­pet­i­tive envi­ron­ment going to look like when we’re ready to launch our product?

Accord­ing to Steven Gary Blank, founder of E.piphany, “the dif­fer­ence between win­ning and los­ing star­tups is that win­ners under­stand why cus­tomers buy. Losers don’t.”

In an ugly but remark­ably use­ful book Blank pro­vides market-tested advice on a method­ol­ogy for fast learn­ing (and fast fail­ing) on the key cus­tomer pri­or­i­ties that make or break a com­pany. I highly rec­om­mend The Four Steps to the Epiphany: Suc­cess­ful Strate­gies for Prod­ucts that Win to my start-up clients. (As well as to peo­ple in prod­uct man­age­ment roles with go-to-market respon­si­bil­i­ties in larger companies.)

The Busi­ness Imper­a­tive: Under­stand Your Customers

In his book, The Four Steps to the Epiphany, Steven Gary Blank details what he calls the cus­tomer devel­op­ment process, a multi-stage pro­gram with key dif­fer­ences based on the stage of mar­ket the com­pany is enter­ing. (Read the book to see how the process unfolds.)

Blank warns that “Cus­tomer Devel­op­ment as a sep­a­rate process from Prod­uct Devel­op­ment is a new con­cept. Not all exec­u­tives under­stand it. Not all board mem­bers under­stand it.”

Based on my expe­ri­ence, I con­cur: this is not accepted yet as the smart way to do things. As a result most star­tups under-invest in cus­tomer devel­op­ment at the times when it can make the great­est dif­fer­ence in their future prospects.

Accord­ing to Steven Blank, founders who want to increase their chances of suc­cess should run the cus­tomer devel­op­ment process in par­al­lel with prod­uct devel­op­ment (rather than wait­ing until the prod­uct is in final test­ing before engag­ing in mar­ket probes).

Blank’s method­ol­ogy iden­ti­fies the key mile­stones where the two processes should inter­link, so insights and deliv­er­ables from each can guide the other. Syn­chro­niz­ing the two processes min­i­mizes the risk that each suc­ces­sive stage of devel­op­ment (or go-to-market) will be over-resourced, rel­a­tive to mar­ket readi­ness or demon­strated cus­tomer inter­est in your value proposition.

Blank describes the typ­i­cal end-game of a failed (or skipped) cus­tomer devel­op­ment process. Those of us in high tech have all seen it, and many have received pink slips at least once as a result.…

The com­pany misses its num­bers for a cou­ple of quar­ters, so the Board (or CEO) directs the VP of Mar­ket­ing to exe­cute a Hail Mary demand-gen cam­paign (or worse yet, a big brand build­ing ini­tia­tive). Inevitably, they fire the VP of Mar­ket­ing when those efforts fail at get­ting demon­stra­ble cus­tomer trac­tion. Despite heroic grand-standing and emo­tional speeches to the sales team, the VP of Sales is ter­mi­nated a few quar­ters later, after con­sis­tent fail­ures to make the num­bers. Soon fol­lowed by the CEO and other founders…

What’s Wrong with Stage Gate Development?

Many software/solution firms have embraced stage gate devel­op­ment as their offi­cial process for prod­uct devel­op­ment. While this prob­a­bly makes sense for dis­ci­plined prod­uct devel­op­ment, it’s a risky way to bet the com­pany, if you don’t have a par­al­lel invest­ment in cus­tomer devel­op­ment and mar­ket validation.

Accord­ing to Blank (and con­firmed by my expe­ri­ence), the stage gate process, as prac­ticed, assumes that the market-sizing and customer-centered hypothe­ses made at the begin­ning of the devel­op­ment process are largely cor­rect. After all, we love the prod­uct — why won’t our cus­tomers love it too?

All the go-to-market plans, the staff build-up, and sell­ing and prod­uct launch activ­i­ties pro­ceed on the basis of those assump­tions — the orig­i­nal busi­ness case which ratio­nal­ized the prod­uct devel­op­ment invest­ment in the first place. As devel­op­ment nears com­ple­tion, the com­pany scales up sales and cus­tomer sup­port resources, hires (or out­sources) the core mar­ket­ing team, and com­mits to aware­ness build­ing and lead gen tac­tics — often well in advance of revenues.

And then when those early fore­casts prove overly opti­mistic, when cus­tomers fail to find the value propo­si­tion com­pelling, or the price they’re will­ing to pay is way out of whack with your cost struc­ture, the house of cards collapses…

Wait­ing until the prod­uct is in the test­ing phase is too late to begin buyer research (that is, research into buyer pains, the buy­ing process, how cus­tomers per­ceive your value propo­si­tion, what they’re willing/able to pay, etc.). Smart com­pa­nies will val­i­date their con­cepts and key cus­tomer assump­tions as early as pos­si­ble, while there’s still time to adjust to cus­tomer needs and priorities.

To find out how and when to engage with cus­tomers, to learn why (or how) they’d be inter­ested in buy­ing your prod­uct, pick up a copy of The Four Steps to the Epiphany.

A more expen­sive alter­na­tive is to engage a con­sult­ing firm that spe­cial­izes in buyer per­sona research, and learn from them how to do this.

The third alter­na­tive is to skip all this research, believe you’re the next Steve Jobs, and bet the com­pany on the bril­liance of your mar­ket foresight…