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Cognitive Biases, Positive Black Swan Events and Startups

Success and Cognitive Bias

One thing that often strikes me about conversations regarding start-up success is the pervasiveness of the narrative fallacy and hindsight bias.

We can go to Wikipedia's entry on Taleb for a definition:

Narrative fallacy: creating a story post-hoc so that an event will seem to have an identifiable cause.

Allow me to illustrate.  What caused YouTube to grow at phenomenal rates in 2005/2006, eventually leading to a $1.65 billion acquisition by Google in 2006?

Was the cause:
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State of Customer Development Survey Raffle Winners

Hi everyone!

Thank you for your participation in the survey, especially if you were kind enough to tweet about it.  (While the raffle is over, if you haven't responded, the survey is still open.) The purpose of the survey was two-fold.

First, we thought it would be interesting to see a little detail about who is involved with Customer Development. You can see those results here.

While the survey results add a bit of color to who is implementing Customer Development methodologies or thinking about doing Customer Development, I wouldn't draw any hard conclusions from the data.  BTW for the those who read 4 Steps to the Epiphany, n ≈ 33.  For those who didn't read 4 Steps to the Epiphany, n ≈ 28.

Second, we are thinking about tools, templates, and other resources to help people understand and implement Customer Development in their business ventures. Stay tuned, for in the coming months, we plan to make some of these resources available to you.

Almost forgot!  Our two winners of the random raffle are: Dave Concannon and Kevin Donaldson.

Thanks again to everyone.  Happy holidays!

State of Customer Development (Part II)

Thanks to all who have filled out the survey. I thought it would be fun to share some of the results!

(Updated 12/22/09: for those interested, the survey is still open, but the raffle is over.

==> I have read Steve Blank's The Four Steps to the Epiphany.

==> I have not read (or not finished) Steve Blank's The Four Steps to the Epiphany.

All personal information will be kept private.)


Now to some results.
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The State of Customer Development

When I first started blogging about Customer Development, last February, I felt like there were only a handful of people talking about it.  I'm sure that's just a matter of perception.  The likes of Sean Ellis, Sean Murphy, Nivi at VentureHacks, Dave McClure, Hiten at KissMetrics, and Eric Ries had already thinking and blogging about it for many months (years?) before.

By March it was clear to me I had stumbled across something that was catching on.  It's not insignificant that Twitter had just reached its "tipping point."  Customer Development would ride the wave.  I first learned the value of Twitter through the promotion of great posts written by start-up superstars, many of which contained elements of customer development.  Rich Collins created the Lean Startup Google Group in June and it quickly grew to a couple hundred members.  There are now over 1700 members!

All of which leads me to this question, done in full cliche-riddled, end-of-2009, year-in-review regalia:

What is the State of Customer Development?

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Your Business "Driving Force"

In Andrew Chen’s recent post, “Does every startup need a Steve Jobs?”, he discusses IDEO’s “product framework for Desirability, Feasibility, and Viability.” Chen’s descriptions of business-, engineering-, and design-focused product perspectives reminded me of the work on companies’ “driving force” popularized by Michel Robert in his series of business strategy books. Understanding your “driving force” is critical to understanding what products to build and who to build them for. The driving force helps shape technology choices, importance of design, market segment, and business model as well as company culture, growth plan and exit strategy.

The basic point, is that while all companies employ technology, sell products or services, employ technology, market to specific segments and use certain distribution methods, one factor dominates (or should dominate) the others in terms of business strategy.

one component of the business is the driving force of the strategy — the company’s so-called DNA. This driving force, in turn, greatly determines the array of products, customers, industry segments, and geographic markets that management chooses to emphasize more or emphasize less

Here is a subset of driving forces Robert discusses:

WordPress: Using a different sidebar for static pages

And now for something completely different. Lessee if I can earn some techy bone fides.

Like many blogs, my sidebar is filled with blog-related functionality, e.g., search box, RSS, feed, blog navigational tools, etc., that isn't particularly relevant to my static pages. So I wanted to use a different sidebar for the static pages.   If you look at my sidebar on this page, it includes typical blog sidebar stuff.  But if you go to the  "Marketing Help" page, you'll see a completely different sidebar!

Easy enough, I suppose, for WordPress experts and easy enough to ascertain, for the technically-gifted. It took me a little while, however, to navigate through the steps and so I thought I would share. Again, I am no expert, so I can't say for sure I've done it the best way or the "right" way, but it works for me and I think these steps are pretty easy. This assumes, by the way, that you are hosting WordPress yourself. These instructions might also vary by WordPress version and by theme.

So here goes:
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Lean Start-up Part IV

It has been awhile since I've updated the progress on a very lean startup I'm helping out.  Last time out I briefly discuss our first engagement with customers through personal interviews and surveys.

I am pleased to report our first failure.  : )

According to our surveys and interviews, our assumptions regarding who will be willing to pay for what appear to be wrong.  (I might add, too, that the feedback seems to be running exactly opposite of the expert advice the company heard while going through a local mentoring process.)

So now that we've got our answers, we're ready to go to market, right?
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OK, fail fast, but fail smart!

While on my way home from buying a lottery ticket today (I am sure to buy from the store that has sold the most winning tickets), I got to thinking about failure.  We've been hearing a lot about it recently:

Failure breeds success. Fail fast, Fail often, or fail early, but just fail!  That way, you can be sure VCs will respect you in the morning.

It is interesting to me that a concept that seems precise -- failure -- can actually have a variety of meanings.  A story passed around a campfire loses its original meaning because words have different connotations depending on context.

Failing fast, early and often without learning from your mistakes -- without a process for learning -- is merely falling flat on your face.  The cheer "failure breeds success" is a self-help gimmick, typically called by MLMers leaning upon metaphysical beliefs Read More »

Customer Development Gut Checks

Through the evolution of their start-ups, entrepreneurs will face many  inflection points, at which decisions made or not made will determine their future.   The painful truth is that a wrong turn may lead to its demise, whereas a right turn leads to another inflection point.

Relevant to ongoing discussions about Blank's "Customer Development," I wish to highlight a few of these "inflection points."

The first step in Blank's model is "Customer Discovery."   This step seeks to answer this fundamental question: Read More »