Before 2003 when Steve Blank wrote his now famous best seller, The Four Steps to the Epiphany, the dot com bust need not have happened.
His book became the basis of Lean Startups with his Customer Focused model. Before then it was all Product Focused, in that startups planned their product or service to the nth degree and ignored customers because “If you build it they would come.”
Unfortunately their budgets went into developing and producing the best, shiniest widget they could possibly make.
There was just one problem – no customers. Their product was either too expensive, or didn’t have enough features or had too many.
It wasn’t their fault, this is the way they, and every other startup, were taught.
A precious few identified the one great but simple flaw in this way of thinking, in that the customer had not been consulted before the product had been produced. Until this ‘epiphany’ no-one had thought to ask the potential customer whether what they were building actually solved a problem for them, at a price they would be willing to pay.
One of the notable exceptions is Steve Jobs, who produced products we didn’t know we wanted until we saw them, and then we had to have them!
Until Steve Blank wrote his book pointing out this simple error, hundreds of millions of dollars had been wasted. True, some of them had successful IPO’s where the clever investors took their profit and ran before debtors came calling, but it was only a matter of time before the bust came after the emotionally charged boom finished.
Ignore potential customers at your peril.
And they did…and closed their doors.
Eric Reis wrote an excellent book nearly ten years later when the term ‘Lean Startup’ was born. He directly credits Steve Blank’s book as having been the catalyst for this.
Today one of the very first questions asked by potential investors, and on shows such as ‘Shark Tank’ is, “How many have you sold?” and “Have you researched the market to see if people want this and will buy it?”.
Strange as it may seem, but these questions are relatively new concepts to startups… except for the successful ones.
The idea of living on baked beans for six months to a year validating that your market exists, finding out what your customers want your widget to look like and how much they were prepared to pay for one (hopefully at a price point sufficient to make a profit), had only occasionally been considered.
Until Steve Blank wrote his book and out of it came the term ‘Lean Startup’.
It may seem obvious now that you must obtain customer validation before spending a fortune on manufacturing your goods and marketing them, but at the time of the dot com boom all investors wanted to know was; do you have a website and does it have ecommerce? That is, can customers buy online.
If the answers to both questions was yes then you received a rather large mountain of cash.
And ran out of it a year or so later.
So, if you are a budding entrepreneur, talk to potential customers before you build anything. Preferably, obtain contracts from one or three saying that if you make this product, and it does what they want it too at their acceptable price point, they would buy it. This way your first customer/s are already ‘in the bag’ and they can provide you with essential feedback as you make changes, fine tuning your product.
Knowing who your customers are, where they are and how you can reach them is critical these days. The dot com bust hurt a lot of people, thankfully most have learned from their mistakes and will not give you one cent if you cannot answer those simple questions regarding your customers. It also helps if you are already working with several customers, so you can receive their feedback and fine tune your product to make sure that when it is released it is successful.
Listen more than you talk, and do not spend copious amounts of money on your product until you know everything about your target customers.
Now we call this a Lean Startup, however I call it common sense.
Good luck to entrepreneurs everywhere, may your customers be eternally happy and grateful that you solved a real headache and seemingly insurmountable problem for them.
Or if you are Steve Jobs, or know where his crystal ball is, please ignore me entirely.
Craig Pickering, 31st March 2018
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