Foolproof: De-Risking New Ventures

Whether it’s a start-up or a product line extension, next to having the right team on board, validating your market prior to developing your product is the best way to increase the probability of your success.

Often I hear the cry “oh, this doesn’t apply to us”…. “We do disruptive technology like Steve Jobs… “our customers don’t know what they need till we show them”.

Truly successful disruptive technologists use research to back up and tune their visionary thoughts. They study their target audience’s behaviour to the point where they can create powerful product insights based on a combination of research and creativity to de-risk their investments. Without this behavioural research you are simply guessing.

It’s no wonder we have such a high failure rate with companies in this country when you hear facts like – “only 20% of companies approaching MOVAC for investment have completed market validation, which is a perquisite for us to invest” – Dion Mortensen

85% of those completing market validation will fundamentally change the functionality of their product, ultimately creating a product that will be more profitable and actually sell!

Jenny Douché has just released her latest book Fool Proof – How to find and test great business opportunities”.

“This easy to read book is full of great tips and guides, it should be compulsory reading for all new ventures and product managers”.

Jenny has included some insights from New Zealand entrepreneurs (Rode Drury’s Xero, Campbell Gower, Phil & Teds buggies, etc) and a few local investors who have experienced the fruitful outcome of performing market validation.

Foolproof is an easy light read, designed for entrepreneurs – 2 aeroplane trips should have it read with no bullshit or big theories. It will be one of those books that you will refer back to.

Unlike other books on this topic, Jenny actually gives you plenty of actionable content, rather than just theory, including lists of questions for all participants of market validation including: target end users, distributors, market influences and enablers. She covers both desk research and engaging with stakeholder groups, including how to talk when interviewing and surveying.

Too many entrepreneurs  fail to look at the wider macroeconomic factors that will influence their business both now and in the future. It’s amazing what insights you can gain from mapping and studying your market place’s value and supply chains along with current trends. (Note: value chain mapping is one of the key activities we do in Business Dominoes – strategy programme). By performing this type of research, you can save yourself the embarrassment of being blind sided down the track, or worst still investing in the world’s best mouse trap that no one will ever buy.

Just because what we have created is faster or better than the existing market alternative, it is not a right of passage to easy sales. As creators of new products, we easily forget the life of a consumer; where we are faced with better and newer products and services, yet we choose to ignore them and use what we consider easy, safe and predictable.

Clearly getting there is a balance between “no market validation” and “doing so much research you never do anything”. Either extreme is going to be a recipe for failure.

Some takeaways on Market Validation:

  1. Market validation before undertaking any major investment is an essential risk mitigation tactic
  2. If you are seeking investment, doing market research will put you ahead of the pack
  3. Do both desk and personal research – yes, talk to potential customers
  4. Map out your market place (value chain and trends), make sure you are not missing any opportunity or trend merging – a lot of this can be done by desk research and validated by contacting key industry commentators
  5. Engaging key stakeholders in the industry in market validation often builds loyal evangelists for you and your new business
  6. A quick prototype or sketch can help discussions
  7. Market validation is not a one-off exercise, it is a crucial part of improving your business and product over its life
  8. If you are developing disruptive technology then you need to be doubly sure of your target audience’s “pain” and more importantly motivation to change behaviour to adopt your new product. Do some behavioural research.
  9. Be warned if you have been in the industry or are a target user – you do not know enough.
  10. Doing market validation will often open your eyes to a better product than the one you have conceived by yourself.
  11. Buy Jenny’s book

I have already purchased 10 copies of the book and are handing them out to clients as compulsory reading.

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Pigs and Chickens – Business Model

Is your business a pig or a chicken?

Harold Star’s book “Chicken and Pigs – Business Models and Competitive Strategies” puts  businesses into 4 categories.

These models are referenced by transaction frequency and revenue contribution from each transaction.

My takeaways from this book are:

Business models are about customers not end users, often people get these stakeholders mixed up. Customers are the ones writing the cheques.

  •  Few companies know why their customers came to them and why they stay
  •  It takes different skills to attract customers and retaining them
  • Once established a business model is very difficult to change. This comes from the customer behaviours and required skills associated around maximizing operational efficiencies working each model.
  • Business models are predicated around decisions made by management around three model elements (strategic DNA) : Customer, Resources and Capabilities and Value Proposition.
  • Many companies operate multiple models,  as such they need to be conscious that each model requires different skills and behaviours

Through his book it he never actually mentions why he calls them such, perhaps obvious, but my take is:

Chickens: Lay eggs – lots of regular contributions
 Pigs: good for bacon and ham at the end, lots of reward once
 Black Widows: Mate and kill their prey, like big customers who consume your business leaving you  at risk with a small number of large customers
 Locusts:  lots of them and they move in packs, short life expectancy

Check out both Harold Web Site and his book for more detail on this pragmatic approach to classifying and developing strategies to manage your customer pools and business model.

The web site has plenty of great information. Click on each model to get more information.

Why do business people speak like idiots?

Before you hit send on that next memo, or deliver that speech or announcement to your staff, or write that next PR release – check for bullshit!

Ok look at your last piece of prose: did you include any of these words “Best of breed, centre of excellence, paradigm shift, results driven, socialise”?

Fear and Peer pressure it seems is the main cause for most business people to use this strange version of the English language.

I have just finished reading “Why business people speak like idiots” a book authored by Brian Fugere, Chelsea Hardaway & Jon Warshawskey.

Whether it’s memos that say nothing, sloppy boring presentations or jargon overload these guys take the knife to all of it. Their take is: this predictable-PC dialect, the business world has fallen into is a waste of time. Hell, we’ve become immune to these empty, generic messages. And as a result no one really listens any more.

The worst enemy of all – CUT PASTE and BLOAT – be careful with that next power point you prepare and how you use these features. Templates kill the message, and cut and pasted templated messages are the worst.

A couple of my favourite tips were reiterated in this book:

  • Stand for something – avoid the curse anonymity – staying low may keep you safe but will not help you get noticed and achieve stuff
  • People love imperfection – ums and ah’s are ok. Overly scripted messages fail. Check out my Rework blog post- “no one likes plastic flowers”
  • Avoid the tedium trap – boring, boring, boring – spice thinks up
  • Stories work – tell a story about a customer or something relevant to your topic – people get it.

Theory vs Story telling:
Brian and team give a great comparison as to the world’s acceptance of storytelling versus theory. Compare the book sales numbers on the two books on transformational change below.

  • “Leading change” by John P Cotter – 210,000 copies sold 2003 – Theory
  • “Who moved my cheese” by Spenser Johnson – 14 Million copies sold 2003  – Story

More Tips from this entertaining and informative book:

  • Short presentations pack punch – straight talkers get more credit
  • Short sentences are more memorable
  • One syllable words build momentum – big words don’t impress
  • Bull has an aroma – and it isn’t exactly channel 5. Say it as it is – if its bad news front up to it and take ownership
  • Avoid the obscurity trap – don’t let fluff and verbosity get in the way of the real message
  • Avoid stupid generic photos or clip art

The good news is that it is not that hard to stand out from the pack, by just telling it as it is and using simple words.

Check out Winston Churchill’s famous speech to the House of Commons June 4 1940, below.

“We shall go on to the end, we shall fight in France,
we shall fight on the seas and oceans,
we shall fight with growing confidence and growing strength in the air, we shall defend our Island, whatever the cost may be,
we shall fight on the beaches,
we shall fight on the landing grounds,
we shall fight in the fields and in the streets,
we shall fight in the hills;
we shall never surrender”

How many big words does Winston use ? 

If you are after a light read and are willing to join the no bullshit movement get your hands on a copy.
Thanks for the book Motive8 team – a great read.

Managing change or riding the wave? – Lessons from a futurist

Are we managing change or adapting to it? 

Success in the future will be determined by your ability to ride the wave of change. Not on the false premise you create change.

That was my big takeaway from an inspirational session with David Houle – self claimed futurist, at an open TEC event this week.

David spent the first half of our time together building the scene: giving us a technology history lesson and then motivating us (NZ)  to get our act together with broadband.  To be honest the warm up was a bit slow for me (maybe I am an impatient bugger) , but then came the really good thought-provoking stuff.

David labels the current decade (2010 – 2020) the Shift Age, with three main characteristics:

  • Flow to global
  • Flow to individual
  • Accelerated connectedness

 David describes a futurist as someone who helps transform shape and form of business. Stating there is always opportunity in danger.

 The main takeaways from this event for me were:

  •  Don’t kid yourself we can no longer manage change – we can no longer be change agents – we live in a world of every increasing change – future winners will be the leaders who can read and adapt to it, rather than attempt to control it. Effectively riding the wave of change.  We need to become a “morph corps” – how well structured for constant change is your business?
  • Forget traditional office environments – we need to separate the concept of place and work.  Modern workers need space to collaborate and cross fertilise. So how about pulling down cubicle farms and create thinking rooms – for staff to get together and collaborate in. Then let them to work at home for the rest of the time? It’s interesting us baby boomers still cannot get our head around teenagers working with distractions around (music, tv, etc) it is time we consider how the new generation thinks and creates best.
  • The new high touch – tech world – “hugging is in” – check out the teenagers – look at the Apple retail concept “the temple of cool” – designed to  get people using stuff. How are you integrating this concept  into your business?
  • Future wealth will be defined by Intellectual Property (IP) – interpreting his case studies my take on this was that it will be  IP + Brand Experience that will drive future wealth.  The emotional attachment to brand experience is real and consuming in this modern world. David gave a great example of this  “whose kid wants a HP or a Dell Laptop?” “Apple is the cool one” – Hell my daughter is fixated on her new ,MacBook experience this year.
  • Watch out for the “digital natives” those young ones coming through – who have no experience of the pre digital world – they are different – adapt and find ways to maximise their talent.
  • People hold the power not traditional corporations / structure – the individual needs to be engaged with. Interesting to still hear people failing to adapt to the new channel of customer/stakeholder communications of social media.

A great morning of inspiration:  If you are interested in more of David’s theories, he does have a book – “The Shift Age”. By all accounts he is another American who has fallen in love with Australia and NZ , so I am sure we will see him as a regular visitor on the NZ speaking circuit. Well worth a listen to.

Running Lean – Business Canvas Variant

Running Lean (e-book) attacks the problem of how to grow web start-ups.  Ash Maurya has taken my favourite business model tool “The Business Model Generation” and tweaked it to meet his need of web SaaS companies.  For me this book was almost two books in one, peppered with some great tips on going companies:
1)      A variant on the business model generation for SaaS companies– the Lean Canvas
2)      A form of the agile development process, adapted to web companies, integrating agile development, experience design and market validation.

The “lean canvas” section was of most interest to me and I finished feeling I wanted more,“perhaps the sign of a great book” – but worth the $19.95 all the same.

The Lean Canvas:

The lean canvas is an adaption of Alex Osterwalder’s  “Business Model Canvas” which he describes in his book: “Business Model Generation”. For those who are not aware of this methodology I would strongly suggest a read of my book review.
Ash dropped – partners, key activities, key resources and customer relationships and replaced them with Problem, Solution, Key Metrics and Unfair Advantage.

I empathise with the Steve Blank’s quote:
“Business Plan: a document investors make you write, that they don’t read”.

My advice to entrepreneurs is use a business model canvas to bait discussion and debate. Hell you may not even need as business plan.

One of the key advantages of this sort of technique is that can create several business models in one afternoon rather than taking months to perfect a business plan that is out of date. Ash recommends doing one canvas per customer segment.

I am a great fan of the business model canvas tool to speed up decision-making and the communication of business plans for both investors and staff.
Of the modifications made to the original plan – I most like the focus on “unfair advantage” and will add this into my own variant inspired by this technique.

An example of the tips that Ash has on start-ups:

  • If you’re going to charge for a SaaS do so from day one – Price is a key ingredient to your product test it early – if you need a new business model find out early.
  • There is an “I” on Vision – create a business model in isolation but then test it  and test it.
  • Plan A’s never work – so be ready to adapt and create plan B and C quick.
  • Focus on activities that generate results – don’t get distracted on long-term activities as many will become redundant as you adapt
  • Distinguish between users and customers – always splinter customers into smaller subgroups
  • 3 must have departments Design, Development and Marketing – all of equal importance
  • Getting investor funding is NOT market validation
  • Have staff meeting’s in most unproductive part of day – not first thing.

Development Model:

Ash’s development model is based around three iterative stages:

1)       Problem/Solution Fit : Do I have a problem worth solving?

  • Is it a must have – if you take the solution away will they mind
  • Can it be solved – feasible
  • Will they pay for it? If not who will?

2)       Product/ Market Fit : Have I built something people want?
3)       Scale: How do I accelerate growth

The book devotes the majority of its 200 odd pages to describing this model-process in detail.

Close, constant and controlled customer feedback is the main theme around which he builds his model to develop the product/service around similar minimum viable product (MVP) principle the 37Signals team describe in Rework. (read my review here)

If you are interested in using diagrams and visual models to speed up your business planning and improve your stakeholder communication I would suggest coming along to one of my business planning seminars .
Oh – yes have a read of this e-book along with “the business model generation” and also check out Ash’s Blog

How to write a book in less than 48 hours

Writing a book in less than 48 hours …
Sounds like an impossible task, but that’s what Lawrence excels in, braking paradigms.

Who said writing a book needs to be an arduous long drawn out process?
Key to his model is rethinking the book process as an entrepreneur rather than as a traditional suffering “writer-author”

I have just spent the weekend attending an insightful workshop lead by Lawrence Green, who has completely opened my mind as to what is possible with limited time. More importantly he  has certainly broken the procrastination loop I was stuck in on this personal goal (to write a book). Hell taking his technique there is no reason not to bash put a couple.

Fundamental to his process – is mapping how he maps the book out – using a drill down process of 3’s  ( 3 main ideas, 3 sub idea’s , 3 sub-sub ideas), focusing in on the purpose and audience, but most importantly not losing the power you have in your natural way or voice. We live in world of the spoken word, so why not just speak your book. The key was in using a smart interviewing techniques with great guidance of a thought out map. 

His interviewing process and audio recording technique, combined with the use of modern elance.com outsourcing for transcription and editing process puts your book creating process on steroids. What blew me away was that you can get 4 hour transcripts (dictation) written up mass at market prices of  sub US<$100.  Lawrenece’s attitude is “why should I write up stuff when I can get others to do it for me”“let me focus on the important part of idea creation and making a difference”.

Often when we commit to written word we miss the passion and true “voice”  of our message. The interview process is powerful – because it unleashes the true self, allow our true message (and value add) to come out.  As Lawrence said “when I review by recordings I found I said things, I didn’t know I knew ”

The weekend catered to a variety of attendees some stuck with writer’s block others part way through the process. Every one left inspired, encouraged and in most cases with a full map of their book and no doubt with another 48 hours they will have it written. For me, I arrived cold no prep, I have left the weekend with core map complete for book no 1 and looking forward to making the next major step over the xmas break – watch this space!

For those of you who have a plan to write a book in your life plan, then this is must attend weekend. He inspires all to break hang ups and reasons not to start, provides frame work and tips on how to get the task done.

Contact Lawrence about reserving your spot on his next weekend retreat.  http://lawrencelewisgreen.com/  or twitter @LLGNZ