My 8-year old is turning into quite the entrepreneur. Sort Of. He inherited by wife’s extrovert gene and on a few occasions has setup shop on our front lawn either selling rides in our bouncy castle for $0.25 or selling lemonade and freezies.
Yesterday he decided to sell some homemade Play-Doh so he did what any other person would do. He spent a bunch of time and effort producing a product, building a stand and a nice display but he ran into a few problems:
- it was almost 40 degrees C outside
- it was the middle of the day, on a weekday
- there were no kids at the park across the street
- there was no foot traffic (there usually is plenty on weekends)
Of course he was miffed he didn’t move any product but he kept his optimism up and persisted because, well, people need Play-Doh.
When I go to startup events or meet-ups, I’m meet many people who are falling into that same trap.
Build it and they will come.
No one is coming.
Last year half-a-million new businesses started in the US. By year 3, almost half have failed. Nowadays it’s so easy for anyone to start a new internet business in their basement, yet, it’s much much harder to gain the attention of customers given how much competition there is for the attention of said consumers.
Making it more difficult is the fact there are so many free services out there making it difficult for the new entrepreneur to run their business without funding. More plainly stated, as easy as it is to start something, the odds are stacked against you.
By the time you finish reading this post, 300,000 more tweets will have flooded twitter and 5 new startups will have popped up in the US.
According to this research, the average life of the corporation is 14 years (2012) compared to 75 years (1937). This stat isn’t likely to get people to change, it isn’t going to create enough urgency for people to do anything differently until it’s too late. A small step you can make towards sustainability is to validate there is demand for your new product or service before spending all of your money building it.
That said, there’s not much I can say in this post that is going to get you to do anything differently either. “Hogwash“, you’ll say. “My idea is awesome! Who are you to tell me anything different? I know my market!!”
Ask yourself this, how many customers do you have?
If the answer starts with “well, none, but...” or any other statement that isn’t an exact number of customers you have, you’ve fallen into the other entrepreneurial trap. ?Denial.
What consumer behaviour do you have to change in order to get people to use your product or service?
People need motivation and ability to try something new, having a 14-field signup page to get demographic info is probably going to guarantee no one is going to fill out your form. If your product/service is in the social media space, do you have to pry people (and their friends) away from another service?
How many people have given up something of value to prove to you that they like your idea?
Have people given you money? Have they given you their contact info? Have they accepted a customer interview? If all you have is “totally, I’ll buy it when you release it“, they aren’t interested.
How have you validated there is demand for your idea? (hint: if all you have is market research data, you have zilch.)
Similar to the last point, how do you know people like your idea and will pay for it?
What metrics are you using to show there is demand? (hint: landing page visits isn’t one of them.)
Acquisition, retention, virility…those metrics matter. Are people signing up and coming back and are they sharing it with their friends. If they are, are there friends signing up?
These questions don’t even scratch the surface about business plans, different market segments, existing solutions and all the other boring business stuff.
There is a delicate balance between building it and hoping people come and building just enough to learn whether or not you’re solving somebody’s problem.
This applies to big companies too. Your IT shop isn’t making burgers, so stop entering orders. Start validating the projects you want to work on are valuable not because somebody said they wanted it. If you launch something new and no one uses it, you might as well have given the project budget to the project team and let them go to Hawaii.
There’s nothing earth shattering about the information in this post but I’m still amazed when I ask these questions of entrepreneurs or people in large organizations and they get offended. That’s natural I suppose. A couple of years ago when my team won the Lean Startup Machine, I was pretty offended that nobody liked my original idea. But we adjusted (aka: pivoted) to the data coming back from our experiments and won the competition.
That said, the people I have had positive reactions from actually change from “build it and they will come” to “let’s start doing some customer development“.
It was sad to see how much effort my 8-year old put into something that failed miserably. He learned a great lesson though and we’ll try something differently next time.
Can the same be said for your organization?