Steve Blank is one of the progenitors of the lean start-up movement. Many of the principles that now form the foundation of the lean methodology were first introduced by him.
His books The Startup Owner’s Manual and The Four Steps to the Epiphany have become indispensable fonts of information for those looking to create a lean start-up. He sat down for an exclusive interview with Entrepreneur SA for this article.
One of your most famous sayings is: Start-ups are not smaller versions of large companies. What do you mean by this?
This seems so intuitive, that I was surprised that in a hundred years, no one ever explicitly articulated this. Existing companies execute known business models.
Related: The Start-Up Crash Diet
That’s a fancy way of saying existing companies know who their customers are, they’re aware of their competitors, they have distribution channels and they know what features any offering should have.
They know all this because it has been figured out through trial and error. So the core thing they need to do is to execute the existing model.
What people never understood is that this is not what start-ups do. For a long time, start-ups were operating like existing companies. The problem was, they were just guessing. They shouldn’t have been executing, they should have been searching for a business model.
This distinction between search and execution had never been articulated. And even if it had been articulated, there were no tools or strategies to do anything with that information. That is where the lean start-up movement comes in. It teaches start-ups how to search for a business model.
You’ve called a start-up a series of untested hypotheses. Why is a business plan unsuited to this situation?
A business plan makes all the sense in the world within a large corporation, when you’re executing a plan. The core of a business plan is a five-year model, which is fine when you’re in an existing company.
That document simply doesn’t work in a start-up, because it doesn’t survive first contact with customers. There is a series of unknowns, so, for a start-up, a business plan is nothing more than creative writing.
You call a start-up a temporary organisation. Why is it ‘temporary’?
A start-up is a fun place to be. You get to bring your dog, you get free food; it’s great. Emotionally, it’s a very satisfying place. But the goal is not to be a start-up — the goal is to become a large company.
You want to ultimately exit that comfortable place and scale. So, being a start-up should be a temporary situation.
You’re known for the mantra: ‘Get out of the building’. What exactly is the intention of this instruction? If you’re a founder, you believe you’re a visionary. You believe you understand the problem, and you have the solution, so all you need to do is build the product.
It’s great to be passionate and believe in what you’re doing, but the reality is, you have no facts. So I encourage founders to write down all their hypotheses with regards to who their customers are and what they want, and take that information out into the street.
I tell them to just find ten people who agree with them completely. Of course, rarely do they turn out to be right. About 99 out of 100 find that their hypotheses were incorrect.
So getting out of the building is really the core of the lean start-up movement. By getting out of the building and validating your hypotheses before you’ve spent too much time and resources on your idea, you compress the start-up process, which means creating a business becomes more efficient.
That said, it’s not about ‘failing’. There’s a myth surrounding lean start-up that it’s about ‘failing early’. It’s about learning. Failure implies you’ve completely blown it or simply gone home and quit.
Learning is something very different. We don’t say that scientists have failed because their theory has been disproved. It is a process of discovery. Lean start-up is similar, which is why I call it the scientific method for entrepreneurship.
Customer development is not selling. It’s about listening. Can you talk a little about this and briefly explain what the process is actually about?
If you’re selling, all you’re really doing is overlaying your view of the problem and solution onto potential customers. What you really want to do is to try and understand the problems of potential customers, and how you might solve them.
You need to find out if you have product/market fit. If you don’t find this out, you’re going to struggle a lot more when you do try to go out and sell.
Now, a passionate founder might be able to sell a solution to customers, even if the product/market fit isn’t quite there, but they’ll never have success through traditional sales forces.
How have you seen entrepreneurs — even those who have embraced the process of customer development — go wrong? What are some of the pitfalls and hidden complexities of the process?
The lean start-up methodology consists of just three simple parts. First, articulate your hypotheses. Secondly, get out of the building and test your hypotheses. Lastly, start building minimum viable products (MVPs).
The hardest part of the process for founders is to just get down to business and actually do it. The process isn’t technically difficult, but it can be difficult on an emotional level, because you have to really put your idea to the test.
Also, the fact is, most start-ups fail. Even if you embrace the process, there’s still a high probability of failure. Even if you’re testing, you might find that your initial hypotheses were just wrong. Or you could discover that the idea isn’t scalable. But lean start-up makes entrepreneurship more efficient. Success is never guaranteed. There are simply too many variables involved.
Lean start-up principles have gained a lot of traction in the tech industry, but they can obviously be applied elsewhere.
In a country such as South Africa, where many lack the funds, education and access to technology needed to pursue other avenues, entrepreneurship is often seen as the only path to success.
Could you talk about the role you see lean start-up playing in South Africa?
Lean start-up actually has nothing to do with technology. It’s just a way of testing hypotheses about businesses. SMEs make up the bulk of entrepreneurs, both in the US and places such as South Africa.
They could be a dry cleaner or a database consultant, it really doesn’t matter. And this is a major category where the principles of lean start-up apply.
You also need to look at the fact that tech-based start-ups are becoming increasingly affordable to launch. The price of starting one has dropped by a factor of a 1 000 over the last few decades. You no longer need $4 million to create a software start-up; you can do it on a laptop.
So lean start-up makes entrepreneurship accessible. You might need money at a later stage to scale, but you can get started without spending anything.
Selling To A Corporate: The B2B Battlefield
If you can apply some of these, you may be able to stop your hair from going grey or halt that premature baldness more effectively than me.
So you’re running a start-up that targets corporate clients. All you need is a few corporate signatures on that paper, and all of a sudden you’ll have a sky-rocketing business with an exciting guaranteed revenue stream every month, right? Right… But it’s not quite that easy.
Maybe you decided against a B2C (Business to Consumer model) because the marketing spend to win over one consumer at a time was not worth it, or that the South African consumer market is not big enough in your industry, or that it’s better to get 10 paying corporates rather than a million paying individuals. You’re not alone, and you’re not wrong.
Both models have their major pros and their major cons. Trust me, I know. But here are some of the learnings I’ve had by pursuing the B2B model.
The pitch: Anything other than a resounding ‘yes’ is likely a ‘no’
First step is to get the pitch. There is a huge temptation to go about it as passively as possible, hoping that the deal will fall in your lap with a well written email. Reality is a little different however. To secure most pitches, a combination (or all) of in-person approach, phone call, linked-in message and email could be required. Once you’ve secured the pitch, book it in both parties’ calendars and hope that there’s no last minute cancellation. The exciting part awaits.
The sad fact of human nature is that people don’t always say what they mean, or mean what they say. Possibly it’s because we don’t like to hurt each other, or it’s because we avoid uncomfortable discussion as if it’s the plague.
Whatever the reason, it’s quite rare to receive “hard no’s”. The reality is that after a pitch, anything other than a resounding yes, or a “when can we start”, or “where can I sign?”, is likely to be a soft no; they have no interest in doing business with you. The entrepreneurial spirit is one that looks at the positive in everything, so it could be very dangerous for a glass half-full entrepreneur to receive a soft no, because this person will very much believe the deal is still alive.
Once again, trust me, I know. I recommend tempering the enthusiasm by looking out for any sign of an excuse during the pitch, and addressing it then and there. You know how hard you worked to get that meeting – so make sure you leave with no question unanswered, knowing that you did everything you could to win that business, or learnt everything you could to enhance your product, service or pitch to win future business. If you don’t get their business, it just means you didn’t get their business right now. Extract the positives and move forward.
1. Balance patience & momentum: They don’t operate like start-ups
It’s often said that a corporate is the most important thing to a startup, but a startup is far from the most important thing to a corporate.
As start-ups or SMMEs, we just have to accept that. Where we would respond to an email in a heartbeat, it may take our corporate contact 2 weeks to respond; especially if they are decision-maker. They don’t need our business, but we need theirs. As such, it’s important to remember when following up on a successful pitch that they are big, they are busy, and they have multiple balls being juggled at once. It’s likely that our proposition is the least important to them, and may be seen as a luxury.
Remember, they didn’t pursue you, you pursued them. So we have to be patient. But this is the difficult part; we have to balance patience with the desire to keep momentum. It’s an oft-said phrase that “time kills deals”. As start-ups, we need to be respectful that our prospective client is busy, but also very direct and honest with them in terms of our position and our goals and objectives.
If we are direct about when we want to conclude a deal and why, it could scare them away, or it could lead to them prioritising the deal as a priority. Either way, it’s better to know where you stand rather than have something drag on in that mythical pipeline for months or years as false hope.
2. Their emails are not their priority
After the pitch, it’s easy to get in an unhealthy pattern. That pattern could look something like this: Send follow up documents directly after the pitch; hear nothing back from the prospective client; send a follow-up email the following week; hear nothing back; send another follow-up email the following week; hear nothing back; send another follow-up email the following week etc. into perpetuity until you go crazy and re-apply for your old job.
I have learnt that busy decision-makers in the corporate environment don’t just sit at their desk all day reading and responding to emails. They’re on the move, in important meeting after important meeting, flying to London followed by a quick trip to Doha and then 10 days in New York. They’re not setting the wheels in motion in response to your proposal in that spare 30 minutes in the airport.
Related: 4 Social Media Tips For B2Bs
As such, when they are available, you need their full attention and you need to get them to commit to the next step. Either a phone call or in-person visit is effective with this. Getting through to them and asking them the difficult questions about the next step is the only way to be top of mind, and to find out if they are serious about this deal or not.
From my learnings, I recommend emails as secondary to the phone call as a way of confirming what was discussed over the phone in terms of next steps.
3. Improve the product / service – become irresistible
With all else said, there is only one way to consistently increase chances of getting a deal over the line. That is, simply, have an incredible product or service that solves a real problem. If you have pitch after pitch where the response is luke-warm, you should ask them before leaving “what would this product have to do / look like for you to sign up right now?”.
Once you’ve had a few meetings like this, you will understand exactly what your market needs. If you build that product or service that the market craves, you’ll be turning away clients because the demand for your business will be so high. Become indispensable. Build something so good that your clients would be crazy to say no to.
4. Build a pipeline
Your business should never rely on one client saying yes. Putting too much emphasis on one deal will make you desperate, and desperation is the easiest way to scare someone away – relationship, business or anything else. Your market should be big enough that a rejection here and there is water under the bridge and simply a learning.
Closing one deal will provide a proof of concept and credibility that can be leveraged to close the next deal. Each subsequent client should, in theory, be easier to win than the previous one.
Finally, if the product or service is constantly being enhanced according to the market’s needs, if there are enough clients in the pipeline, and if the follow-ups after a great pitch are being done effectively, deals should go through systematically. At the end of the day, closing a deal shouldn’t feel like hard work. The best way to win business is by building a great business that solves real problems.
How to Name (Or In Some Cases, Rename) Your Company
Naming a company is hard, and founders often get it wrong.
Jennifer Fitzgerald is co-founder and CEO of Policygenius. But in 2013, when her company was starting out, it had a different name: KnowItOwl.
“We thought it was a clever play on the term know-it-all,” she says. The company helps consumers find the right insurance policy for them, so she wanted a name that suggested wisdom and guidance, with a friendly animal like the GEICO gecko.
“Then we started talking to investors, engaging our first users and talking to vendors and insurance company partners, and we just kept having to repeat the name — spell it, explain it. Pretty soon we were like, We’ve got a problem.”
And it’s not an uncommon problem.
A name is one of the biggest early decisions a company founder will make, and many get it wrong. Best Buy was first called Sound of Music. Nike was Blue Ribbon Sports. Google was BackRub. Each was a mistake in some form — too narrow, too generic, too evocative of the wrong thing. (BackRub?) For KnowItOwl, the problem was being too clever.
So how should a company pick a name? Fitzgerald did some research and came up with this process.
Step 1: The big name dump
Fitzgerald created a shared Google Doc for her five-person team and over the course of a few weeks sent out prompts to focus people’s creativity — asking for portmanteaus (like Microsoft, the merging of microcomputer and software), names with numbers (like Lot18), themes like references to trees and more.
Step 2: Structure brainstorming
One Saturday, she invited friends in the branding and marketing industry to join her team for pizza, beer and what she calls “structured group brainstorming.”
She’d put up a word that related to her business — say, protection. Everyone in the room had 10 minutes to write down 10 protection-related names.
Then they’d pass their list to the person to their left and take seven minutes to create seven names inspired by the other person’s list. They repeated this a few times.
Step 3: Cut the crap
Between the Google Doc and the brainstorming, they had hundreds of names and started eliminating them in phases.
First: “Can you imagine saying your company name to a Wall Street Journal reporter?” That wiped out many. (Bye, “Harmadillo”!)
Then they nixed any similar to competitors’, names that could come off as unintentionally wrong (a classic of the form: Pen Island) and names they couldn’t get a dot-com domain for.
Step 4: Judge by colour
The surviving names were evaluated based on various criteria, including brevity (shorter is better), evocativeness (does it convey meaning?) and searchability (is it unique enough that when searched for, it won’t get lost?).
Each criterion was marked as red, yellow or green. The name Policygenius, say, got a yellow for brevity. Too many reds meant elimination.
Step 5: Test people’s memories
Will people remember a name? Can they spell it, if they hear it? To test this, the team recorded someone saying the finalist names, posted the audio to Soundcloud, and embedded it in surveys that they paid $2,000 to have sent to 1,000 people.
They also asked respondents to write down any emotional associations the names created z- “just to make sure nothing was offensive or conjuring up any emotions we didn’t want to conjure up,” she says.
After this, Policygenius had its name. It now employs 130 people and helps a million people each month find insurance, either through its service or content — success that (ahem) owl started with a great name.
This article was originally posted here on Entrepreneur.com.
How To Develop A Unique Brand Name In A Global Marketplace And Protect It
A helpful How-to-Guide on developing a unique brand name and conducting trademark searches.
As a marketer, I know just how important it is to choose the right name for a company or product. It needs to be easy to spell and pronounce (in various languages if you’re going international). If possible, it should have some positive connotations (definitely no negative ones) that can be associated to your company or product. And above all, it must be distinctive and unique.
The question is how do you work out what is unique, beyond a URL search, and then how to protect it? The answer is trademarks. I know what you are going to say…
Do I really need to worry about trademarks?
Yes, for two reasons.
- You might be a small business already trading under a name that already exists in the market. And maybe the other company that has trademarked that name in your industry classification won’t ever issue you with a cease and desist letter when you enter their market, because they are nice people and just don’t feel there’s any harm in letting a company by the same name trade in their market. Or maybe they do. It’s a decision that is totally out of your control. Do you really want to take that chance as you build a global brand?
- You’ve invested tonnes of money into building your brand in your market and then all of a sudden another company enters the market with the same name. Trademarking your name protects your brand from being copied or from another company riding the wave of your brand awareness you’ve invested so much into building.
Trademarks are important if you want to build a brand on a solid foundation and protect it in the long-term.
Related: When do I register a trademark?
How hard is it to successfully trademark a name?
According to the US Patent & Trademark Office, there have been 182,000 trademark registrations and 312 000 applications in the past 5 months alone. That’s more words than there are entries for in the Oxford Dictionary!
You can imagine how hard it is, and how much harder it gets with each passing month, to dream up a name for your product or company that is unique and distinctive enough that it can be successfully trademarked and protected in large markets like the US or Europe – especially in the technology industry. But there are a couple of routes you can try when developing a new name if you find your chosen one is already trademarked.
How to come up with a unique company name
When coming up with a company or product name, you can either go with:
- an acronym (IBM, SAP),
- a family or person’s name (Ford, Dell)
- an existing word (Amazon, Apple, Salesforce)
- a misspelled word that looks or sounds like an existing word (Xero, Google), or
- a completely new word either made up of a combination of existing words (PayPal, Instagram, Accenture), or
- a completely new word entirely made up (Skype).
How to make sure it’s available
Try Google first. If you don’t get any companies coming up that are using that word as a name in your industry, you’re off to a good start. Keep in mind that even if another company does come in the results, it doesn’t necessarily mean they’ve trademarked it.
Check the national trademark search database for the country or countries you want to trade in and search for your name within your industry classification:
- US Patent and Trademark Office search system
- Canadian Trademarks database
- European Union Intellectual Property Office search system
- United Kingdom trademark search
- Australian Government IP Search
- New Zealand IP Office Search
- South African Companies and IP Commission search
If you don’ t come across any trademark registrations for that same word in our classifications, then contact a trademark attorney to conduct a more thorough search using their local experts in those markets and advise you further. You don’t need to work through an attorney as you can register a trademark yourself, but working with one can save you a lot of time and increase your chances of getting your registration through the first time.
In conclusion, some advice
My advice to any company already operating and with ambitions to grow globally is make sure your brand name is trademarked and protected.
If it is not, you should
- conduct your own search in any of the national IP or trademark offices’ databases (some of which are listed above, others can be found through a simple Google search);
- hire a credible trademark attorney to either register your name or advise and guide you along the process of registering a new name.
If you MUST change your businesses name, then
- hire a brand development agency for the creative process of developing the right name for you. (We didn’t do this but only because we had no idea how time consuming and difficult it would be. Although it worked out well in the end and we love our new name, it did take up a lot of time and perhaps more importantly “headspace.” I could have been focusing on other pressing things requiring that required this level of strategic thinking or creativity;
- hire a change management agency or consultant to help with the communication and roll-out process of the new name to all stakeholders: staff, partners, customers, and the market. We managed well on our own, but if you don’t have the internal competency for this, or the time, rather outsource this very important and often neglected step;
- and finally, just pray to whatever god(s) you believe in that whatever name you finally come with gets the green light from stakeholders and your trademark attorney. (Yes. Seriously.)
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