Comments (4)

By brantcooper, May 26, 2010 12:23 pm

The consultants came out in droves to weigh in on Steve Blank’s recent post, “Consultants Don’t Pivot, Founders Do.” (Myself included.)  Generally, all were in agreement with Blank’s primary point:

Founders get out of the building (physically or virtually) to test their hypotheses against reality. There are times when customers are going to tell you something that you don’t want to hear.  Or you’re going to hear something completely unexpected or orthogonal to what you expected.

As I like to say, those that hold the assumptions need to test the assumptions.   In the comments, several of us pointed out that teaching Customer Development is a viable service for which entrepreneurs can hire outside consultants. Sean Murphy:

We work with teams as they prepare for and then execute the customer discovery and validation steps in B2B markets. We helping them rehearse leaving the BatCave, we often go with them on customer discovery interviews or sale calls, we debrief from prospect meetings to formalize lessons learned and adjust the sales presentation or the target prospect definition or sometimes the feature set.

Clearly, there’s some value being provided here.  In my experience, entrepreneurs have repeatedly sought help with both Customer Development basics, as well as some of its more nuanced components.  Sean Ellis raises a separate issue, agreeing that consultants can provide value, but wondering how the economics work.

I believe the need is there and most consultants have the expertise to fill the need; the problem is that their cost exceeds their value at this stage.

There is no doubt in my mind that this is a challenge, but there’s more that one way to skin a cat, so I’m not sure such a blanket statement is accurate.  (Note that Ellis isn’t suggesting that consultants don’t provide fair value for their compensation, but that the compensation is likely to be too high for the particular stage the business is in.)

This begs the question, what exactly can be outsourced and at what cost?

What Part of Customer Development Can be Outsourced?

It’s worth pointing out that one of the best Customer Development practitioners I know is Cindy Alvarez, who is a Product Manager and not a founder at KISSMetrics. Theoretically, at least, Alvarez could be doing what she does as a consultant, rather than as an employee.  If she had internal assistance (say, a less Senior PM  or a technical marketer), she could potentially have two or to three clients and perhaps make a pretty good living.  And while KISS is likely at or near Product-Market Fit, Cindy has been executing Customer Development for them for quite awhile.

As with employees, the key element to working with consultants is trust.   Further, Founders must process outside information to make decisions.  Is it better, for example, for Founders to pivot based on analytics than Customer Development information provided by a trusted adviser?  If a Founder has a “salesperson mentality,” and cannot stop selling when supposed to be listening, does that doom the company?  Or can a trusted adviser steeped in Customer Development best practices provide better information?

The more I reflect, the more I think blanket statements about what can or cannot be outsourced are dubious at best.  Learning must happen.  How it happens is not particularly relevant.  The key measure is willingness to learn.  If you belong to one of the archetypes of anti-lean, you are not likely to do Customer Development anyway.  If you are willing to learn, you can likely learn from a trusted consultant, too.  I do think the level of understanding potentially suffers, however, so the stage of Customer Development you’re in should influence who the lead CustDev actors should be and what other roles might benefit the process.

In the book, Entrepreneur’s Guide to Customer Development, we break Customer Discovery down into three stages:

• Problem-Solution fit, i.e., validating your core C-P-S (Customer-Problem-Solution) assumptions:  This is the most important stage for Founders to be heavily involved in.  Consultants might help you articulate your assumptions, define market segments, find prospects to talk to, help prepare the presentation and the presenter, and help analyze results.  I have, in fact, also done the interviews for a Founder with both positive and negative results.
• MVP development: Best if Founders are still heavily involved with early adopters, since they likely need to hone in on the core value they’re providing.  I don’t see much value in consultants here, other than help with process,, like coaching Product Managers (and Founders) to not engage in feature mongering.  This phase requires a dedication to minimum viability, and a balance between customer-driven solution and vision.  If the two diverge, a pivot is required and only Founders pivot.
• Proposed Funnel, i.e., learning your sales and marketing roadmap:  Founders need to be engaged relative to their adamancy regarding their sales and marketing assumptions.  Other business model assumptions are typically exposed here, as well.  I believe consultants can play a larger role in this phase, since many founders can use a lot of help thinking through marketing basics.  Consultants might help with defining market segments, proposing funnel hypotheses, and preparing (or conducting) conversations, surveys, etc., to test and validate assumptions.

Clearly I believe a high level of Founder involvement is necessary.  Founders who actually practice Customer Development themselves are arguably in a better position than those that delegate.  But not only are there parts of Customer Discovery that can be effectively delegated, consultants may have a role as well.  The question remains, however, whether (1) consultants can make a living doing this, and (2) whether startups can afford fees that result in (1).

What Model Works for Outsourcing Customer Development?

I know several individuals who practice customer development as consultants.  Clearly, Sean Murphy has found a model that works for him and his clients; Nick O’Connor is another.  I have helped several clients, though finding the right model has been a challenge.  I am passionate about working with early stage companies and have done so for years as a volunteer mentor at San Diego’s CONNECT Springboard program.  Figuring out how to make some money, too, isn’t a bad thing and admittedly, I’ve struggled to find the right model that serves well early stage Founders.

Recently, Patrick Vlaskovits, pointed to me a startup lawyer with a unique business model, Kevin Houchin. Houchin charges a low monthly retainer for a long(ish) range commitment, which allows clients unlimited contact, but not unlimited access.  So I’m trying the same thing. So far, so good!  I haven’t solved my scaling problem, but I get to work with some great entrepreneurs who are willing and able to execute on Customer Development principles.  They are high-energy, have bought into Customer Development and truly value (and benefit from) feedback, pointers and actionable recommendations.  For more information, see here.

In light of this more in-depth conversation regarding outsourcing and leaving aside for a moment, the general evils of consultants, what do you think about outsourcing components of Customer Development?

Comments (1)

By Patrick Vlaskovits, April 29, 2010 1:11 pm

Brant and I have finally finished our book, The Entrepreneur’s Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany, within which we have included interviews from successful entrepreneurs in order see if their startup experiences mesh well with Brant’s and my interpretation of and experiences with Customer Development.  (I won’t beat around the bush, while our interviewees may not have called it Customer Development per se, they certainly practiced elements of what Steve Blank has codified as Customer Development in almost all but name.  And without exception, they applied fierce and relentless skepticism to all aspects of their businesses.)

We’ve had the pleasure of speaking with Jeff Smith (Smule), Fabrice Grinda (Zyngy, OLX), Ranjith Kumaran (YouSendIt), and Bruce Moeller (DriveCam).  We’ve condensed their experiences into case studies which are featured in the book.  However, there was so much great material, we simply could not include all of it.  Therefore, I’d like to take this opportunity to share an insight that came out of our interview with Bruce that we found quite edifying, one that goes to the heart of the Customer Development methodologies.

Background:  DriveCam uses video technology, expert analysis and driver coaching to reduce claims costs and saves lives by improving the way people drive.  From the DriveCam website:

DriveCam’s palm-sized, exception based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. Exceptional forces such as hard braking, swerving, collision, etc. cause the recorder to save critical seconds of audio and video footage immediately before and after the triggered event.

[Emphasis mine.]

Bruce shared an interesting story about how assumptions made in the lab, based on data and “sophisticated” math undertaken by “sophisticated” analysts, fared in the real world of cement mixer trucks.  Remember, the DriveCam device’s core feature is to record audio and video when triggered by exceptional forces such as swerving.  When DriveCam went after the cement mixer truck market, they calibrated their devices based on the assumption that cement mixers would flip only if subject to a large sideways g force.

Seems reasonable, right?  After all, cement mixers are big, heavy trucks, and not to mention, filled with, well, the eponymous cement.

Turns out, not so reasonable after all.

Bruce recounted that when one of their first customer’s cement mixer trucks flipped over, the DriveCam device had failed to record what had occurred and what may have caused the accident — the customer was irate and Bruce was more than a little embarrassed.

Turns out that (outside of the lab!) cement mixers trucks can flip at very low speeds (1-2 mph) while at normal g forces when encountering things in the chaos of the real world, very ordinary and common things such as soft road shoulders.  Bruce’s customer knew this and was counting on Bruce and the DriveCam team to know this as well.

Lesson learned:

“My philosophy is you don’t know what you don’t know and if you were ever right in a given moment, and if your guesses were ever true it would be serendipitous.  You must attack your assumptions at all times. My basic tenet: question yourself, because the world is ever-changing.”

-Bruce Moeller

For more insights that speak directly to the Customer Development processes, please purchase The Entrepreneur’s Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany.