How Moving in with Customers Can Help Speed up Your Customer Development

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One of the ideas that came out of The Lean Startup by Eric Ries is to engage customers as consultants to solve their problems before creating a commercial version of the solution.

The founders of enterprise search startup Coveo are seasoned entrepreneurs with a lot of experience selling to large businesses (part of their team built Taleo). With Coveo, they decided to take the Lean Startup techniques a step further by moving into their clients’ offices. Small development teams would stay on site at clients’ offices until they were able to solve the customers’ problems.

In B2B, proximity to customers is key. By having multiple development teams stationed at client offices, Coveo was able to build custom integrations, take note of commonalities and, eventually, build a standardized product.

On-site teams can report on customer pains, the context of use of the product, stakeholders, underlying needs and enterprise reality. All of this information feeds back into the sales process and product positioning.

Moving in with customers allows you to multiply your reach when doing customer development. You can build different installations, evaluate different business types and map out all the stakeholders your sales team will need comes time to scale the sales efforts.

How can this technique be applied in your startup?

5 Key Things Entrepreneurs Need to Demonstrate to Gain Credibility in a Market

One of the big challenges for first-time entrepreneurs targeting a new industry is getting enough credibility and visibility to have true business discussions with stakeholders.

Prospects look for client referrals to purchase, but it’s impossible to get referrals without actual purchases. Many entrepreneurs fall prey to this chicken and egg situation. For prospects, it can feel like a waste of time and resources meeting with unproven entrepreneurs (here’s how to motivate them).

Early on, there are five things that entrepreneurs need to demonstrate to be perceived as credible:

  • Personal Credibility – Do you know what you’re talking about?
  • CommitmentAre you in it for the long haul?
  • Reliability – Are you doing what you say you’re going to do?
  • Passion – Do you really care about solving our problem?
  • References – Who can vouch for you?

In a typical North American market, it usually takes over a year to build relationships and get mid to large business customers.

You can’t expect businesses to share their true internal needs and problems with just about anyone they meet. The credibility of your startup and your personal credibility must be established from the first interactions forward.

Why should they trust you? Who can tell me that I can trust you?

Start with a Free Product to Validate a B2B Business? It’s Possible

After the success of YouSendIt (now Hightail), Ranjith Kumaran and Mehdi Ait Oufkir co-founded PunchTab, a loyalty and engagement platform for brands, agencies, blogs and businesses.

When it came time to validate PunchTab, Ranjith and Mehdi decided to focus on distribution before monetization. Although they could have easily launched with a paid model, the co-founders decided to test whether they could attract users by launching with just a free tool.

The decision paid off. Hundreds of website owners started using PunchTab and talking about the platform. Ranjith and Mehdi were able to capture loads of valuable feedback on product usage, feature requests, unmet needs and perceived value.

By starting free, the PunchTab founders were able to gain visibility, prove product usefulness and, ultimately, scale into a working business model. Managing a high-trafficked application also helped them establish credibility with business users. The service was fast and reliable; it could handle their business needs.

Although starting free may not be possible for all B2B companies, PunchTab was able to get a lot of valuable feedback by simply opening the gates.

How to Use Other Sales Staff to Gain a Competitive Edge

Find companies targeting your market, get close to them.
– Steve Blank, The Four Steps to the Epiphany Author

Unless you’re creating a completely new market, which is very difficult for a start up, you’ll find that there are already people selling to your prospects. These people have done the legwork for you; they’re your proxy to the enterprise. They know what is sellable; they know the levers and the pain points.

You can meet a lot of these people by attending industry tradeshows and conferences. They’ll be the people standing next to booths on the floor waiting for people to talk to. Bored salespeople are very talkative, especially if you can tell them something they don’t know.

Unless they’re selling competing products or are in an upper management role, they probably won’t mind sharing a lot of what they’ve learned. Trading a little bit of what you’ve learned to understand your prospects is a deal you should make.

Sales people operating in the same space are also good contacts to have in your network. They can share business leads and link you to opportunities for sales channels. Ultimately, they’re the people you’ll want to hire when it’s time to build a sales team.

The Importance of “Watering Holes” in Product-Market Validation

You have to go where the customer is. – Michael Wolfe, Vontu Co-Founder and Startup Advisor

A “watering hole” is where your prospects gather for pleasure or for work. It can be a conference, tradeshow, seminar, restaurant, bar, hotel or professional association networking event. Finding the watering hole can go a long way in helping you meet prospects to speed up validation, but it requires an understanding of your prospects’ behaviors. You need to figure out what interests they share and what events they value.

One entrepreneur was working on a product for doctors. Through the grapevine, he overheard that doctors congregated in a certain waiting room on their breaks. From this moment on, the waiting room became the entrepreneur’s second office. He began to casually chat with doctors to gather information and find leads. A waiting room is the perfect example of a watering hole that only entrepreneurs with knowledge of their prospects’ behavior could find.

For a Swedish data visualization startup targeting the American market from Europe like Spotfire, this proved critically important.

They became very successful when they decided to focus exclusively on their life science customer segment. The location of their sales office became instrumental to their success. Being located in Cambridge, MS—within driving distance of the large pharmaceutical companies in New Jersey—allowed the Spotfire sales executives to get a lot of face time with their prospects.

When it came time to validate a new customer segment (the energy sector), Spotfire President Rock Gnatovich asked his sales team to find the watering hole of their new prospects. What they quickly found out was that BP, ExxonMobil, Shell and many of the large American oil companies have offices in the Energy Corridor in Houston, TX. Company executives met over lunch or drinks in just one or two restaurants.

To meet oil company executives, gain visibility and be perceived as a member of the community, Spotfire decided to set up the company’s new sales office in the same building as the two restaurants. That proximity led to quick validation, many deals in the energy sector, and eventually, a $195M acquisition by Tibco Software.

What Every (Pre-Revenue) Lean B2B Startup Should be Doing

The only things that matter early on are Product-Market fit and not running out of money. – Fred Lalonde, Hopper Co-Founder and CEO

When you start up, customer development is the most crucial thing you can do.

You can build a product, raise money, hire a team and incorporate your business, but if your product assumptions don’t match the market needs, you’ll eventually regret having done any of these things.

Your startup success depends on your ability to focus on finding the right product for the right market and not running out of money.

Analytics, responsive design, domain name, branding, press, etc. are not keys to your success; without a product that people want, the perfect press release or analytic setup will never matter.

Forget about vanity metrics and think small. Product-Market fit is when you have five passionate customers willing to vouch for your business. The temptation will be strong to start optimizing and building sales channels before reaching P-M fit, but resist it.

Don’t build a company before P-M fit. Keep you burn low.

Fred Lalonde’s list of things that don’t matter early on

Fred Lalonde's list of things that don't matter early on

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How to Quickly Build Social Proof in a Market

Vincent Guyaux joined Mindready Solutions following good success as VP of sales of Locus Dialogue, a speech-recognition startup.

Mindready Solutions was a leading supplier of automation, embedded and test systems for the automotive, aerospace, industrial, medical and telecommunications industries.

As General Manager of the embedded systems division, Vincent was responsible for bringing to market their IEEE 1394 hardware and software. The “1394”— also called Firewire by its inventor, Apple — was a serial bus interface standard for high-speed communication. The idea was to embed the technology in automobiles to replace the legacy Canbus, a network for in-car communication among multiple devices.

To build the firm’s credibility in the industry, Vincent joined the 1394 Trade Association, an international organization promoting the proliferation of the technology. By definition, the members of the association were all early adopters.

To make a name for himself, Vincent volunteered time to write reports and organize events. One of the conferences Mindready Solutions organized had all the 1394 Trade Association members travelling to Montreal for a three-day conference during the famous International Jazz Festival.

In total, 60 potential customers working in large corporations around Europe, Japan and the United-States attended the event. Between the meetings, Vincent made sure to wine and dine the attendees, even taking them for a riverboat ride around Montreal.

It was a costly stunt, but the prospects would remember Vincent for going the extra mile and feel indebted to him.

As a matter of fact, when the time came to organize a discussion around replacing the Canbus with the 1394 bus that Mindready Solutions produced, Vincent was able to bring in over 30 well-known experts for keynotes at the annual Detroit Auto Show.

Industry experts with whom Vincent had spent time building long-term relationships were on his side to back his claims.

The organization of these events and the contribution to the association helped build tremendous credibility for Mindready Solutions. For years, whenever an article would get published on the industry, the firm’s name would always be mentioned in one way or another.