Entrepreneurs’ Rule #1 – Know Thy Customer
Entrepreneurs of every ilk share one thing in common: they must make decisions with imperfect information. There is simply too much to do and too little capital, staff, and time to do it. Tradeoffs must be made. Actions must be taken. Consequences must be dealt with. But the one tradeoff you shouldn’t make and the one consequence you shouldn’t have to deal with is taking shortcuts on your path to deep customer intimacy. As long time entrepreneurs, we see “Know Thy Customer” as rule number one in creating a thriving company and culture.
Customers are your reason for being, assuming you intend to be for profit. They are also the ones in charge of “problem to be solved.” We may innovate like crazy and challenge them to see problems and solutions in different lights, but ultimately they are the arbiter of good or not good enough when it comes to your solution. What shackles so many entrepreneurs is that their product is ultimately a solution in search of a problem. They did not absolutely nail the problem to be solved. As a consequence, customers show interest, tell them how cool their product is, then move on and spend budget with somebody else. The entrepreneur’s sales pipeline is full of promise, but cash flow statements tell another story.
In our line of work, helping growth stage entrepreneurs achieve breakthrough growth, we see this problem repeated time and time again. Talented teams with incredible work ethic that are condemned to mediocrity because they are not intimate with their customer and have not nailed the problem solved equation.
For instance one group with which we worked was well-funded and staffed by brilliant engineers. They had a technical product for large scale data centers. They knew the underlying technology of protocols, security risks, etc. better than anyone. They overviewed their solution use cases to us and then they introduced us to their clients to better understand how they used the product. The two views did not match up. It became instantly clear why their pipeline had run out of gas. It’s very hard to sell the next customer on your value when you don’t fully grasp the business problem you actually solve. Technical mastery is not business problem mastery. Another company that was pivoting from a custom solution provider to a cloud offering for disaster recovery ran into another variant of this same challenge. Customers just weren’t connecting with their offering. Was it X, or Y, or Z and how was it different from A, B, and C? They simply did not have enough concrete input from customers to make hard decisions on what their product did or should do. Their product offered something for everyone, but not enough for anyone. They needed to put bright lines around their offerings – it does this and not this and here’s why. Ultimately they made the commitment to customer discovery efforts and now have those bright lines in place, their value is clear and real, and they are on a roll.
Developing the customer intimacy you need to dominate segments and create explosive growth requires a few things on your part. Let’s start with beliefs and habits as a foundation.
· What color glasses do you wear? Do you look at the customer through product-colored lenses or do you look at the product through customer-colored lenses. Adopting the customer’s point of view is crucial, yet it is not the typical or comfortable way of sizing up the problem that needs solving. When you want to win customers you must have empathy. This mind shift helps establish that empathy. Empathy is a key to making further customer dialogue/interviews surface the truly golden nuggets.
· You don’t know more about the problem than your customer. No matter how smart you are, and how much secondary research you’ve done, you don’t have a full grasp on the nuances that remove pain or create true opportunity for your customer. They may not even know it fully and then it’s your job to share your unique insight and then to tease issues out of them before going live. They are the source of truth. They are the judge of whether you’ve solved enough of a problem for them to plunk down cash and make a change from their old ways.
· You don’t learn anything in your office. Product brainstorming, development, and refinement are grand endeavors. They are always pressing. They are always visible and top of mind. Entrepreneurs have a huge tendency to get so focused on getting features and capabilities added to the product that they get landlocked in their offices. There is little to learn sitting in front of a computer. The habit must be in place to get outside your office, in front of your customers and learn from them. Present your observations and hypotheses, get theirs, and gain the knowledge that creates the tipping point for your products value. Make it a regimen. We had yearly challenges for our top executives for customer face to face visits at their offices. This was part of our DNA and led to customers viewing us as customer centric and to high win rates.
Customer Knowledge – Questions You Must Answer
Once you’ve put the beliefs and habits in place, the tactics of Know Thy Customer become that much more fruitful. Ultimately developing customer insight is about understanding how they create value and what gets in the way. It’s about developing assumptions on the hurdles to their value creation based on your observations and testing and refining them regularly. It’s about turning those assumptions into cold, hard knowledge about how you can advance their game better than any other alternative. Those that win the customer knowledge game win the customer market share game. So make sure you can answer a handful of items thoroughly.
· “So What?” The problems you solve must be worth solving. Your idea only has as much merit as the market perceives. You need to fully understand the value of solving this problem. When you are pitching your offering every customer has a little tiny guy whispering “so what?” in their ear. You must be able to answer that. You also need to answer “who cares?” as well to develop targeted value propositions.
· A Day in the Life. You need to get in the weeds with how customers create value, and to understand the “job to be done.” Your questions should be framed to help you best understand the customer’s primary role, specific responsibilities, key tasks, and who or what they interact with. You must understand how they and the process fit into the big picture. You must cull out the major improvement opportunities like cycle time, low value tasks to eliminate, and what knowledge can be leveraged to make better, faster decisions.
· Barriers to consumption. As important as knowing what problem to solve and why it should be solved is why this problem hasn’t been solved. Is it because of cost? Resources? Risk? Ego? Technology? If it’s cost, is it a capital or operating expense issue, or an uncertainty of true costs?
Gaining these insights with customers solidifies how they create value and what gets in the way of that. This should be established at the corporate level as well as for key stakeholders. You will know their priorities and their pains. From this you can refine your assumptions into a working solution/hypothesis that you put back in front of potential customers for a final pass before creating products. The key is continuing this cycle of learning, hypothesis, and validation so you truly nail the problem solved, and can pivot for perfection.
Winning the customer insight and intimacy game proves to be a huge lever on future success. Remember, in today’s marketplace it’s not enough to be perceived as an innovator, you must be perceived as being needed. Making “Know Thy Customer” your rule number one sets you on that path.
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