Successful enterprises go through four stages of maturity. Each one makes extraordinary demands of its leader, who must undertake new tasks, acquire new organizational skills and expand his or her leadership abilities.
In this post we’ll focus on stage one, or finding your company’s target audience. This stage truly begins when you commit to turning your idea into a tangible business. For starters, make sure your idea is something you believe in and are genuinely enthusiastic about. Once that’s done, the real work begins. Your primary task in this initial stage is customer validation, i.e. figuring out whether you can turn your idea into a product or service people will pay money for. Start by talking to as many potential customers as you can. Meanwhile, seek advice from a network of donors, employees and advisors.
At this stage, your startup is like a special project. There is no schedule or routine -- instead, you should simply be doing whatever is necessary to make daily progress. This lack of routine and of process drives ‘manager-personality-types’ crazy; where some see creativity, they see chaos. That’s why managers who have been highly successful in big corporations often fail when they try to start a company of their own.
How do you lead an organization that is almost 100 percent sheer effort and 0 percent process? Start by calling a huddle, i.e. an informal meeting with your team, whenever there is a significant development, positive or negative, in capturing that first set of customers. These discussions are a good way to strategize about what comes next and avoid any miscommunications among your team members.
As the product or service comes into clearer focus, make sure you answer the following three strategic questions:
What is the most efficient way to find real customers? Because you likely have a limited budget, it’s important to be quick and cost effective.
How can I make a very basic product -- also known as the minimum viable product or MVP -- attractive enough so customers will agree to try it? This requires that you accurately understand the value of your product.
How can I deliver the MVP to customers? Answering this question forces you to understand the processes required to make and deliver your product.
Now comes the hard part. Many entrepreneurs are excited about their idea, but find few potential customers share their enthusiasm. Such rejection can hurt. For most people, changing an idea they are passionate can be difficult. Nevertheless, you must be open modifications. It’s the first big test of an entrepreneurial leader.
It’s not easy. Determining which parts of your original idea are valuable and which aren't is an emotionally draining exercise. You may feel anxious and disoriented because you feel you’ve lost control. You are likely exhausted because you have to consider and evaluate so many possible directions for your fledgling venture. There's a good chance you are burnt out from having to contact as many potential customers as possible in order to test your assumptions about who is buying your product. As your idea evolves, you will need to change your prototype or your service description or your specifications over and over again. This is an enormous amount of work.
Unfortunately, instead of staying tightly focused on customer validation, many entrepreneurs pour enormous amounts of energy into devising a business plan. It’s a mistake: You cannot have a meaningful business plan until you know what your customers want. Virtually all of your time, and your team’s time, should be spent listening to customers and modifying your prototype in response to their feedback.
When speaking with customers, don’t let yourself be deluded by casual compliments. Just because a customer says some nice things about your product doesn’t mean he will buy it. Most people hate to deliver bad news. Only when a potential customer declares something like, “I must have this -- how soon can I buy it now?,” can you be sure you are on the right track.
This initial stage only ends when you can describe, with a high degree of certainty, who will buy your product or service and how you will deliver it to them. Accomplishing this isn’t for the faint of heart -- many smart entrepreneurs fail to answer these questions. The good news is people are eager to accept products or services that will improve their lives and make them happier.
F. Scott Fitzgerald famously said that “the test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function." That’s the essence of the challenge in stage one of a startup. As an entrepreneur you selfishly want your product or service to change people’s lives. But to do so you must selflessly listen to potential customers and be prepared, even eager, to change your original idea.