Not solving a “tier 1 problem” is a recipe for (startup) disaster: Or maybe not?

“Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.”

– Biz Stone

Tier 1 Or Nothing

2 weeks or so ago while scrolling down my Facebook’s newsfeed I stumbled upon this eye-catching (business) quote:

If your startup failed, it’s because it didn’t solve a tier 1 problem for a large enough audience.”

Which was a post intro from a guy named Mitchell Harper, a big shot ‘exited entrepreneur’.

His point in a nutshell?

Unless you solve one of the top 3 problems your target customer is experiencing you’re scre*ed!

Yep, irrespective how good your product is if you don’t abide by that ‘market reality’ you will fight an uphill battle.

And that made me thinking…

Is that claim any true?

Or maybe another classic business BS as usual?

Since it’s not an easy one we have to do a bit of digging.

Painkillers, Vitamins, Oxygen Or Vaccines: Which One Is Your Product?

First things first.

Why does Harper think that way?

In his own words…

…“[it’s because], they’ll be so focused on solving their first 3 problems that you’ll never get a look in… They simply won’t have time (or budget) for you if you’re not solving a problem that’s top of mind for them — a tier 1 problem”.

And that brings us to the old-age business dilemma:

Vitamins vs painkillers!

In fact, over the last couple of years, some additional elements got blended into the mix (and yes, I am of course referring to oxygen and vaccines).

Just in case I lost you, let me explain these analogy-driven terms really quick:

1. “Painkiller products”:

Two words…

“MUST HAVES”

Yep, these type of products fall under the essentials category.

And another common characteristic of them is that they provide an almost immediate relief.

Some classic examples?

Gasoline, electricity, internet, telephone, just to name a few.

2. “Vitamin products”:

The main alternative to painkiller-products?

You guessed it…

Vitamins (aka “as nice to haves”).

Said differently, this kind of products are not bought out of sheer necessity but rather because of a desire to fulfil some non-critical individual preferences.

Such examples could be things like jewellery, watches, productivity tools, dating apps, etc.

3. “Oxygen products”:

Not hard to guess what’s that about, right?

That’s correct. Are products that, as ‘the experts’ put it, “you can NOT live without”…

Usual suspects/examples?

Insulin (for diabetics), revenues (for companies), heating (for Siberians), or on the flip side air-conditioning (for ‘Middle Eastern people’ during summer).

4. “Vaccine products”:

And last but not the least are the so-called vaccines.

Which as you might imagine are goods with strong preventive nature such as insurance products, health check-ups, staff engagement programmes or making…a will.

Everything clear?

Good!

But at this point some of you will probably wonder; how is that related to ‘tier 1’ problems?

Well, if you think about it the underlying assumption is the same:

Either you go for this option or you’re doomed to fail.

The cold hard truth?

They are both better in theory than in practice!

Good in theory but a bit messy in practice

Why do I say that?

3 reasons to get you started:

Reason #1: Vitamins can become painkillers

That right, you did read that correctly.

But what’s the reasoning?

Quite simply because for pretty much any product category there are some trigger events (aka points of market entry) that cause people to…

… start getting really interested (or even experience an intense desire) on them.

Take for example calcium supplements.

Under no way, shape, or form could be described as a painkiller product, right?

WRONG!

Why?

Because one such trigger event (pregnancy) turns them into painkillers.

In case you wonder why, is because during pregnancy, the baby needs plenty of calcium to develop its bones and as a result, pregnant women are often being advised (on top of adding certain foods in their diet) to take separate calcium supplements.

Reason #2: A product can fall into multiple categories at the same time

This shouldn’t come as a surprise.

After all, naturally, different people have different visions, ways of thinking and set of priorities, which makes their buying habits and preferences vastly different to each other.

Let’s take handbags for examples.

As you might remember just a couple paragraphs earlier, we described them as “nice to haves.”

And here comes the question…

In what universe this product category is both a painkiller and a vitamin at the same time?

Well, if you think about it even though the majority of people can hardly describe them as a ‘must haves’ I can assure you that for a sizeable section of fashion-conscious ladies is a completely different story…

Reason #3: Tier-1 problems alone “don’t bring happiness”

What does that suppose to mean?

Simple – just because a problem is painful, urgent and on top of peoples’ minds doesn’t make it a winner.

In fact, what’s equally important is the competitive landscape, people’s budget (and past behaviour) and even the existing ‘out of the box alternatives’.

Why do I say that?

A couple of reasons…

a) If the competition effectively address that problem and people are happy with what’s out there unless you have a unique angle you’re not in any better position than none tier-1 driven businesses)

b) For a big chunk of people even painful and urgent problems don’t justify the decision to open up their wallet and actually pay for them (mainly because of budget limitations, and fixated consumption behaviours).

c) Most products don’t just compete with goods that fall in the same product category but also with existing alternatives (example: taxis compete also with bus, trains, bicycling, walking, or even car riding)

***

My take on all this?

Even though I have to say when I started out my startupper journey I didn’t pay much attention to this dilemma, over the years I came to terms with the importance (at least for B2B) of connecting the product to the wallet as closely as you can.

But to answer today’s question, even though I definitely see the merit of going after tier-1 problems, I do believe the claim that it’s the only way for making it is more BS than reality – just look around you; how many successful products defy that logic?

And with that said let’s put this post to bed with today’s key takeaways:

Today’s Key Takeaways

– Products that are both painkillers and vitamins at the same time are more the rule than the exception

– Tier-1 problems alone “don’t bring happiness”

– Just because a problem is painful, urgent and on top of people’s head doesn’t make it a winner

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Logic is the beginning of wisdom, not the end”

– Leonard Nimoy

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Business Idea Validation: Still Popular For a Reason or Simply Overrated?

“Money talks, bullshit walks”

– Stephen King

The (Classic) Fear

If I were to ask you, “What’s the number one fear of new entrepreneurs right before the launch” what would you say?

Ok, I am not a mind reader but if I had to guess, I’d probably think you will go with the classic:

Putting something out there that nobody wants!

But you know what; in case that you missed it, 21st-century entrepreneurs seem to have figured this out…

Whaaaat?

3 words: Business. Idea. Validation.

Yep, just do a simple Google search for: ‘How to test demand before building a product’ and you’ll come across 1000s of articles, books, podcasts preaching the importance of battle-testing your idea before jumping in.

And if you’re someone like me your first reaction, chances are, would be to say: that’s a good thing.

Why?

It prevents you spending a ton of time (and money) on the wrong ideas

– It forces you to make your target customers part of the product creation process

It gives you a chance to collect feedback early on before to start getting emotionally attached to “your baby”

– It enables you to have a MUCH smoother course correction should you find that you’re heading in the wrong direction

But if it’s such a good idea why to waste our time debating this concept in the first place?

Simple. Because is not as straightforward as it sounds!

Let’s get straight in…

Testing Demand Before You Get Started

But before jumping on the other camp, I think it worth opening a parenthesis and exploring how today’s entrepreneur (try to) test the market’s water before diving in.

So, what’s the answer?

Here you go…

Method #1: Targeted Surveys

You know the drill…

Go and find your people, either online or offline, present the business proposition (what the problem is & how you intend to solve it), ask a bunch of “relevant questions” and close with the BIG question: if this product was available would you buy it?

Method #2: Do the ‘landing page thing’

The story usually goes like this:

– Set up a landing page

– Include a short snippet (or even a video) about the future product

– Say is coming soon

– And… ask the visitors to leave their email if they want to be notified when is live

Just like Dropbox, someone may add!

Method #3: Perform a smoke test

What’s that I hear you ask?

Well, simply put, is the idea of testing the appetite for a product by creating a site, pretending that a product exists, driving targeted traffic and if someone expresses an interest say something along the lines of “sorry, we run out of stock”.

Method #4: Pretotype it (aka Wizard of Oz MVP)

Pretotype?

Yes, you did read that correctly!

Without getting overly technical, this concept is basically ‘a smoke test mini-me’ with the only difference that when somebody says: “I want that thing”, rather than coming up with a lame excuse why you can’t deliver it you actually make things happen.

How?

By delivering the product manually behind the scenes.

Take Nick Swinmurn, Zappos Founder for example.

When he came up with the idea of having an online shoe shop for testing things out (before creating anything) he did this:

He began by asking local shoe stores if he could take pictures of their inventory. In exchange for permission to take the pictures, he would post the pictures online and come back to buy the shoes at full price if a customer bought them online.”      

 – The Lean Startup

And when someone ordered a pair of shoes from his online site he would then go and handle everything (payments, shipping, returns, etc.) manually without the customers having the slight idea that was the case.

Method #5: Put together a (real) MVP

No need to say more, right?

Anyhow, just for consistency, here is a formal definition by Eric Ries:

“The minimum viable product or MVP is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”

 Yep, that involves actually developing something, but for most “experts” it still counts as a legit pre-build validation technique.

But with all that said it’s time to see what the others have to say…

Business Idea Validation is BS: Here you why!

Quite a strong thing to say you might note.

And what’s the reasoning behind it?

According to the advocates of this school of thought, in short, it’s because of this simple reason:

Hitting product/market fit takes time and iterating a non-existent product doesn’t work in the real world…

Just in case I lost you lets me break this down for you…

– Hitting product/market fit takes time

For most startupers, that’s almost a no-brainer.

As Ash Maurya eloquently put it in his classic book, Running Lean, “what separates successful startups from unsuccessful ones is not necessarily the fact that successful startups began with a better initial plan (or Plan A), but rather that they find a plan that works before running out of resources.”

Yep, they managed to iterate from a plan A to a plan that works.

The moral of the story?

No guesses here – expecting to hit a product/market fit from the get-go is more like a dream than reality so act accordingly…

However, where things get a bit more complicated is the second bit of the above reasoning.

– Iterating a non-existent product doesn’t work in the real world

Why is that?

Well, in the opinion of many, even if the claim that business idea validation, done right, allows you to almost predict whether a new product would be successful or not (by testing demand before building anything) is valid there are 2 BIG problems:

– On the one hand, it kills ideas that may at that time to be flawed but with some iterations could be turned into viable propositions

– And on the other hand, it keeps you spinning your wheels but getting nowhere

And the logic behind that second point is that unless you launch something out there (yep in the real world) you do NOT really learn because:

a) You’re stuck in your little bubble (or at best in a controlled environment) that acts as a reality distortion enabler

b) The feedback you receive from non-customers (which is practically what you’ll get unless you go through the MVP root) rarely cuts the mustard.

***

My take on this?

Even though I have to admit for many years I was a strong advocate of doing the “validation thing” (I even devoted a chapter about this in my book) I am now of the belief…

…that an entrepreneur’s job before diving in not necessarily to try verify that his/her ‘solution’ would be accepted in its current form but instead to ensure that the market exists (by doing some basic market research) and the pain-point s/he tries to tackle is not only REAL but is also PRESSING.

After doing that, I have no reservations to say that at least from my own experience shooting for a single feature MVP is the way to move forward!

But to answer today’s question, yes business idea validation is popular for a reason but I do agree that iterating from a plan A to a plan that works can NOT happen unless you launch something concrete out there…

Today’s Key Takeaways

– Hitting product/market fit takes time

– Iterating a non-existent product doesn’t work in the real world

– The feedback you get from non-customers rarely cuts the mustard

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going.”

– Paul Graham

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Trying to fail fast to succeed sooner? STOP!

“If hard work is the key to success, most people would rather pick the lock.”

– Claude McDonald

The Stepping Stone…

Ever heard of the ‘fail fast to succeed sooner’ motto?

If you’re into startups I bet you do.

Originating in Silicon Valley, this phrase has not only become a standard business advice, but over the last couple of years, it has even evolved into an international movement.

Yep, I am not even kidding…

Events, TED talks, festivals, best-selling books, you name it.

The common denominator?

Of course – celebrating failure!

You did read that correctly. Founders get out there and share their… success FAILURE stories for reinforcing the idea that is not something you need to be ashamed of, but an essential part of being an entrepreneur.

As they say, failure it’s a key stepping-stone for success and you should embrace it even…

… if you’re a high-achiever, Type A’ personality, Alfa-male/female or whatever you like calling yourself.

And yes as an add-on bonus, failure also, wait for it… builds character!

But are all these any true?

Well, that’s what would be exploring today…

The (Business) Case for Failing Fast

So, why do many startup “experts”… urge entrepreneurs to fail fast?

Well, in their opinion, it boils down to three words:

Little Bets Theory!

What’s that about?

Mic to Peter Sims, creator of this theory

In these fast-moving times, it’s next to impossible to predict what’s around the corner, and harder still to formulate a foolproof plan to deal with it. Truly innovative companies,… don’t get caught up in projections and predictions. Instead, they embrace uncertainty, take a chance, fail quickly and learn fast.”

Not crazy different from what Eric Ries advocates in his classic book, right?

Anyhow, the idea here is that no matter how much research (and thought) you put into your plan, you always start with a set of unproven hypotheses.

And more often than not, will end-up being miles away from reality…

Hence, rather than wasting months on planning (and developing) a product in ‘stealth mode’ hoping that somehow you’ll beat the odds, go and ship something out there, fast, (by rapid prototyping) find the truth early on and learn as much as you can from the experience.

Then keep releasing “stuff” (and iterating them) until you get it right.

This way not only you will minimise the risk of failing big, but also maximise the chances of ever making it…

So, are you sold and ready to get “converted” into the practice of failing fast?

STOP!

Fail Fast to Succeed Sooner is a Terrible Startup Advice

There, I said it!

Why is that?

Simple – the “throw enough mud at the wall and some of it will stick” model, is a startup strategy lottery ticket mentality that can take you only so far.

I know, some of you might say the ‘little bets’ and the ‘spaghetti on the wall’ models… are not one the same.

And you’re probably right.

However, from my own experience I see the majority of this ‘philosophy devotees’ use it as a permission to:

a) Recklessly jump into markets that barely understand (and don’t even bother doing some basic market research)

b) Create sloppy unworkable products just for the sake of shipping something fast

c) Throw in the towel on the first setback because they are trained to believe that startups either take off or not (yep, right from the get go)

So, on this I am with Rob Asghar…

Embracing failure makes for a trendy mythology, especially for the aspiring heroes of innovation. But it’s mostly lip service… Forget the cute mantras. No one should ever set out to fail. The key, really, shouldn’t be to embrace failure, but to embrace resilience and the ability to bounce back.”

But let me make something clear.

In no way I am suggesting to embrace the equally dangerous “refuse to accept failure” doctrine, nor am I recommending that you plan for months on stuff that may or may not work.

Rather, what I and many others say is this: yes start small, ‘go lean’ and do smart experiments, and yes iterate/pivot when needed, but do NOT delude yourself that startups either take off or not and try to fail fast to succeed sooner.

And one last thing about moving fast…

The Inconvenient Truth about Moving Fast & Breaking Thing

What’s that truth about?

Here you go:

We used to have this famous mantra … and the idea here is that as developers, moving quickly is so important that we were even willing to tolerate a few bugs in order to do it…What we realized over time is that it wasn’t helping us to move faster because we had to slow down to fix these bugs and it wasn’t improving our speed.”

– Mark Zuckerberg

Yep, Zuckerberg himself, the guy that pretty much invented this line of thinking points out the obvious:

Moving fast only makes sense when you’re running in the right direction

My point?

Is one thing to strategically ship stuff fast aiming to get maximum impact from minimum effort and a completely different thing to recklessly launching half-arsed products that are unlikely to produce any form of validated learning* just for the sake of learning by failure.

Yes my friends, by recklessly shipping cr*ppy products odds are you will end up either being politely ignored (by customers) and get 0 feedback or receive the classic response: “Your thing is rubbish, give me a break”.

And talking from experience that ain’t no good…

With this out of the way, let’s wrap things up with today’s key takeaways.

Today’s Key Takeaways

– “Throw enough mud at the wall and some of it will stick” is NOT startup strategy

– Forget the cute mantras. No one should ever set out to fail

– Moving fast only makes sense when you’re running in the right direction…

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

Fail fast = quit and give up easy = spaghetti against the wall = no clear strategy going into your business = no ability / willingness to try and pivot as market conditions change = easy way out

– Mark Suster

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Product vs Services Startups: 6 key factors you should consider before making up your mind

“Every choice you make has an end result”

 ~ Zig Ziglar

 The dilemma

Most new entrepreneurs have fallen victim to it…

“Landing” on a seemingly perfect business opportunity only to find out a few months later that the business they got into is not working for them.

Of course, that’s not the end of the world and pivoting may well ‘do the trick,’ but sometimes such accidents are preventable.

How?

By seriously considering ALL the options before deciding which type of startup business to get in.

And today I’d like to talk about the product vs service company dilemma.

Whaaat?

I know. For many that’s not really a dilemma at all because these days it has almost became ‘common knowledge’ that “selling a product is always better”, or at least that’s what the experts’ narrative appears to be…

But is that any true?

Well, not really – as you’ll see just in a bit, depending on your life goals, business aspirations and risk profile the right answer would be different.

Yep, each option comes with set of different side-effects (and benefits I may add) because as Mark Birch rightly reminds us here: “Running a service company versus running a product startup are vastly different creatures.”

So, shall we jump into the meat of today’s post and explore those differences?

Good, let’s get straight in…

6 Key Differences Between a Product and a Service Startup

Difference #1: Time to market

Can you guess why?

That’s right, the amount of time it takes to convert an idea into something sellable differs dramatically depending on the route you take.

– For the first scenario (having a product-based startup), you have a ‘model’ that requires investing time and resources upfront for conceptualising, creating, and testing the product.

– On the flip side (having a service-based startup), you can get a business off the ground and start billing for your services much, much sooner. You only have to define the service, find a customer, listen to his/her requirements, and then start delivering the pre-defined service.

Pretty straightforward isn’t it?

Difference #2: Scalability

Even though you probably heard that term a thousand times let’s make sure we’re all on the same page.

According to Martin Zwilling, scalability means your business has the potential to multiply revenue with minimal incremental cost. A software product is a classic example of a scalable solution since it costs real money to build the first copy, but unlimited additional copies can be quickly cloned for almost no incremental cost.”

And yes as you can imagine, scalability-wise, “product startups” have an advantage because…

…on the one hand you have a model that trades dollars for hours (there is only so much you can do in a day*), and another which is limited only by the amount of customers are willing to pay for that product (especially if the item is in a digital form).

* Just to be clear, of course, if there is a lot of demand for your service you can hire more people, but the extra cost can hardly be described as minimal. (See Martin’s definition.)

Difference #3: Business risk

So, which business model is riskier?

No guesses here – selling a product.

Why?

1) Unlike service businesses where you have a customer commitment to pay before you even start working, with products there is no guarantee that you’ll sell enough units to justify the initial investment. *

* Obviously, you can mitigate some of this risk by a) gauging demand upfront, b) trying get pre-orders, or c) start small with an MVP, but still it’s not the same.

2) It has much higher set-up cost compared with selling a service, because you have to commit resources to building “that thing,” rather than bill clients for a specific skill/expertise you ALREADY have.

3) Product requirements are drafted by you and NOT the customer. This is an obvious one. When you sell a service, the paying customer quite often knows exactly what s/he wants and helps you figure out the product specs; but when have a product, you have to figure things out yourself – and that often involve some guesswork.

Difference #4: Reusability

 This couldn’t be more straightforward.

A product-based business requires you to reinvent the wheel once; and then, if the “experiment” is successful, you can fully leverage it by selling the exact same product (which you obviously need to update/improve over time) as many times as the market wants it and keep profiting from it.

– On the other hand, service-based businesses deliver one-off solutions. In each instance, the result will be highly personalised to each client and that often means it won’t be reusable for the next clients.

So, in this scenario, the cash-producing asset wins!

Difference #5: Time spend on “your thing”

 If you have a service business around a core skill of yours for which other people are willing to pay, it’s not hard to imagine that you’ll have to spend a fair amount of time practising it, whether it’s web designing, career coaching, book editing, or any other type of hard skill you may have.

With product businesses, you build it once, and then if successful, you update it on regular intervals. But what about all the rest of your time? Yep, marketing and selling that thing!

I know. Some might say that’s not necessarily the case because you could always try outsourcing “that piece” and of course, that’s an option but at least when starting out not only chances are you won’t afford that external help, but in my mind it can also be a bad business decision…

Why?

Because, a) as the founder you’re the person that knows the product and the market better than anyone else and b) during this early stage having this 1-2-1 conversations with your prospective customers would be invaluable and not to be missed.

Difference #6: Control

Just think for a moment…

On the one hand you have a business model that requires you to offer a highly bespoke (and normally one-off) service to each client. On the other hand, you have to provide a standardised product that tackles a very specific problem experienced by a narrow category of people.

With a service-based model, you need to mould your solution in accordance with each client’s specific requirements. With products, it’s your job to find the convergence between what customers would accept and YOUR vision.

Your vision… you did read that correctly!

Quite a lot of entrepreneurs act like their viewpoint/vision simply doesn’t matter, because they’ve grown accustomed to the idea that “the customer is your boss.”

But in reality, it’s your business and YOU call the shots!

And just to be clear, I am not saying it’s impossible to be in control with a service-based model. I am just making the point that with a product, it is much easier to say, “This is what’s for dinner; take it or leave it!”

So, with all that said, what’s the verdict?

Well, that’s for you to decide!

As said right from the beginning depending on your life goals, business aspirations and risk profile the right answer would be different…

***

Ok, “guys”, that’s all from me for today!

If you enjoyed today’s post, check out my kinde book, The Aspiring Entrepreneur Entry Strategy: A practical Step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“In the modern world of business, it is useless to be a creative, original thinker unless you can also sell what you create”

– David Ogilvy

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Listening to customers: An absolute no-brainer or maybe just unnecessary?

 “If you don’t listen to your customers you will fail. But if you only listen to your customers you will also fail.”

 – Amazon slogan

Should we listen to them?

I know. You’d probably be thinking that’s a silly question…

After all, not listening to the people that would ultimately decide whether ‘our thing’ is worth their hard-earned cash or not sounds rather counter-intuitive.

However, here is the thing: at least when it comes to creating a new product (especially, if it’s your first one) it seems that things are not as straightforward as you would imagine.

“Why?” I hear you ask.

Well, here are 3 reasons to get you started:

Consumers are pretty bad predicting their own future behaviour

That’s right – (most) people suck at predicting what they’re going to do tomorrow, let alone what they are going to do months down the road.

So, by putting them in a situation where they need to predict how they will act in a hypothetical future cenario, you risk getting unreliable input.

People don’t know what they want until you show it to them

Does this phrase sound familiar?

That’s right – it’s a famous quote from Steve Jobs in a 1998 interview with Business Week!

Why did he say that?

Well, Jobs himself never really explained what made him think this way but nonetheless many others tend to adopt this line of thinking.

Take for example Lior Arussy a supporter of this worldview. In a post of him on this topic he’s asking: “Was the IPod, IPad or IPhone developed from customer surveys? Did the Wii come about because of customer feedback cards? Were scooters the idea of a bunch of kids needing more exercise? Your answers should be a resounding NO! Customers cannot do your thinking for you; they like what they see, when they see it.

What is the moral of the story, according to the supporters of this argument?

It’s not customers’ job to know what they want!

– It can act as a stumbling block to getting/staying ahead of the curve

The logic behind that statement?

Here you go: by listening to customers, you risk falling into the sameness trap.

Why is that?

Gregory Ciotti thinks that’s the case because “when you rely on consumer input, it is inevitable that they will tell you to do what other popular companies are doing.” [And he adds.] How can you get ahead of the curve if your customer feedback mostly consists of today’s popular ideas?

So, with all that said, is it time to admit that listening to customers comes at a hefty cost?

Or maybe that’s not the whole truth?

You guessed it – it is NOT. As they say, there are two sides to every story and today we will explore both of them!

Listened and failed: 3 companies that have “been there, done that”

Before jumping on the other camp, allow me first to share with you some famous real life examples of companies that followed the conventional wisdom, listened to their customers and succeeded big time failed miserably…

1.Walmart

The customers’ request: They wanted Walmart’s aisles decluttered, which used to be packed, big time, with products.

You Asked. We Listened: What was Walmart’s response? You guessed right… they listened and cleared out space by reducing the excess inventory that “lived” stacked in the aisles

The end result: The sales plummeted, according to Phil Terry’s estimate, by $1.85 billion. Why? Quite simply, because Walmart’s customers are drawn to the vast selection of cheap products. And by decluttering their aisles, they shoot themselves in the foot since it automatically meant less cheap products from which to choose.

2.American Airlines

The customers’ request: For years their passengers complained about the seats being too narrow, rows that are too close together, and non-existent leg room.

You Asked. We Listened: What was American Airlines response? They listened and redesigned their aircrafts to offer more room, extra leg room, and bigger seats.

The end result: A few months down the road, they had to reverse course. Why? Simple! Their travellers valued cheaper tickets more than this kind of luxury (and in case you wonder the tickets prices had to be increased to compensate for the fewer aircraft seats resulted from giving people more space).

3.The New Coke (Coca-Cola)

The customers’ request: In the early 80s, Coca-Cola’s market share had been steadily declining. The company’s execs decided to investigate to find out the main reason for this fall. After spending months doing thousands of in-depth customers surveys, they had their answer: customers seemed to prefer the sweeter taste of Pepsi!

You Asked. We Listened: And yes, Coca-Cola listened, after countless sip tests, they introduced the solution! The New Coke, which was much sweeter and smoother than the original formula, was announced on April 23, 1985, as a replacement to its nearly century-old secret formula.

The end result: You already know what happened. It did not go well! After a couple of years, and massive losses, they ended up discontinuing the New Coke* and reintroducing Coke’s original formula branded as “Coca-Cola Classic.”

* What went wrong? Many suggest that the taste, which was originally attributed as the root cause of that decline, was in fact NOT a deciding factor in consumer purchases. Even more, at a later stage the execs came to realise that the original Coke had much more symbolic value to customers, who were “emotionally attached” to it.

Thinking of not listening to the customers? STOP!

Yep, you did read that correctly. Not listening to your target market and playing the visionary rarely ends up pretty.

Why?

Simple – unless you’re Justin Bieber with a huge tribe of followers willing to buy whatever you throw at them, you have to play by the market rules.

Which are those rules?

  1. Markets that don’t exist don’t care how smart you are
  2. Customers don’t buy products, they buy outcomes
  3. There is not enough space for everyone

And by just saying scr*w the market, we risk adding ourselves to the long catalogue of founders that failed due to lack of market need.

So, what’s the alternative; blindly following what the customers say to you?

HELL NO!

Instead, let the money do the talking…

Money speaks louder than words

What do I mean by that?

Simple, since the main driver behind pretty much any customer purchasing decision is nothing other than a problem that needs to get solved there is no better way…

… to find out which problems people care about than going out in the real world (aka market) and see where they spend their cash.

Exactly – doing surveys is fun, performing customer development interviews is important, observing customers’ day to day behaviours is great, but personally, unless I see people spending money on a problem or need, I don’t waste even a millisecond thinking about crafting a product!

So, what I am saying is simple: even though I agree it’s NOT customers’ job to design our product, I am of the belief that the best way to find out what people are likely to want is by analyzing their past and current purchasing behavior because time and time again it’s proven to be the best indicator of future behavior.

But to answer today’s question: Is listening to customers an absolute no-brainer or maybe just unnecessary?

I’d probably say absolute no-brainer, but not in the traditional way…because listening, must not only go MUCH deeper than “words,” but also be taken with a pinch of salt…

… because ultimately unless you launch something, you can’t be sure that a) what you listened to is 100% accurate and b) your brain translated/interpreted the ‘market words’ correctly.

Today’s key takeaways

– Don’t rely on customers to build the product for you. That’s YOUR job.

– What customers really want and what customers say they want are not always the same thing.

– You’re not Steve Jobs (or for that matter a visionary); get used to it.

– Listen to the customers, but always keep in mind that money speaks louder than words.

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical Step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“What people do, what people say, and what people say they do are entirely different things.”

– Margaret Mead

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