I love customer discovery. I’m good at it. Which is good because talking to people I don’t know and soliciting valuable feedback is crucial to our philosophy of lean startups.
I became good at customer discovery because I had to. My first work experiences were all in new industries using new technologies, so I couldn’t go to school or the library to learn how the content management market or the web acceleration market worked. Instead, I had to ask people. I found that if I played myself as a sales guy, nobody would talk to me. But if I played young, smart, inquisitive entrepreneur who needed advice, almost everyone would give me at least 15 minutes of their time.
What is customer discovery?
To clarify, in this context customer discovery is a simple enough concept: Come up with hypotheses for all the various pieces that go into a business such as the problem you solve, who the customer is, the value proposition, etc., then go out and talk with lots of people who know more about those things than you do to get some facts which validate or refute what you think.
To do it right, you have to pick up that phone
Today when I embark on a typical customer discovery process, I start by identifying my target industry — for example the Canadian banking sector. Next, I look for companies in that sector (big banks, credit unions, lending companies, regulators, and service providers). Then I look for individuals who might be able to offer some insight.
I’ll set a target of 50 outreaches per day. (Note that this isn’t a one-day thing. I do this daily for a few weeks.) Fifty outreaches per day might sound high, but you just need to look at it like a sales funnel: keep pushing all phases of the funnel forward and make sure you keep it topped up. LinkedIn has proven to be an excellent tool for finding and contacting people. I usually start with a message that goes something like this:
I would like 15 minutes of advice from you. I’m exploring a new business in the XX sector and before I start it I want to find out if I’m crazy. How about day/time?
I appreciate in advance you considering my request.
Every day I search LinkedIn to keep the funnel full. Every time someone looks at my profile or accepts my invite, I hit them up and move down the funnel. I find at least 20% respond.
At the same time, I’m always working on my risk list, assigning uncertainties to different risks. I ask myself questions like: What are the top three things that scare me about this idea? Or, what would scare an investor?
Ask the right questions
Once you’ve done this often enough, it’s like the Matrix and you start seeing the patterns. As investors ourselves, we are always focused on the same questions:
- What problems does this technology solve?
- What are the customer acquisition costs?
- How big is this market?
- What are the the key customer pains?
Once I get on the phone, I don’t sell, I don’t pretend I’m in stealth mode, and I don’t get cagey and ask them to sign an NDA. I want to reduce my uncertainty on key questions, so I play it straight and share exactly what I’m trying to do, asking them specific questions that will help me de-risk the idea.
Why most entrepreneurs struggle with customer discovery
We keep seeing entrepreneurs come into our program who struggle with basic customer discovery. We do our best to explain how it works, referring them to resources like the Startup Owner’s Manual, but I’m almost always disappointed. Some entrepreneurs are too scared to try. Some try once and get discouraged if they fail. Some think that if they just ask friends or send them a survey, it’s good enough (it’s not). Some approach prospects acting like sales people and are surprised when they’re treated as such.
I must admit that I’m not great at teaching customer discovery yet. (I’m always telling my kids to qualify a “can’t” with a “yet”, so I suppose I should listen to my own advice.) But I genuinely admire those who can effortlessly coach others. When we started Strangeloop, the former CEO of one of the top acceleration companies that had just been acquired for $300+ million took my call from a beach in France. He explained the perils of the industry and gave us some of the most valuable advice we ever got on how to launch a whole product, not just commodity pieces. All this while he was getting a massage.
His insight helped us save two years and $2M in expensive software development costs. Teaching customer discovery has turned out to be harder than I initially thought, but it is absolutely critical to building a successful business.
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