If I had to pick one common weakness in the SaaS and startup businesses I see it would be customer discovery. I hear a lot about markets. And many great business ideas. Then I start to ask about engagement with real potential customers. Too often the the story gets thin. Yes there are contacts and introductions. Evidence of substantial discussions and learning can be lacking. This article is the start of an attempt to explore two questions: Why is a fundamental and invaluable business idea often ignored. Or at least implemented badly? What startup leaders can do about it?
I have called this the incomplete guide for two reasons. First, customers are people. Every relationship is a unique experience. So no set of rules or methods will cover everything. Second, it is intended to be the first of several parts. I am just not sure how many yet!
Execution not strategy
My usual introduction to a company is a business plan or a pitch. Any competent business plan includes a view of the market. If the company is making progress there may also be some evidence of traction. My habit is to dig into these areas to find the answer to one key question: How close is this team to knowing who their real customer is?
In a good business this is a great conversation. It gives me confidence that the founders are engaged in customer discovery. Sometimes they are all the way there. More likely they are part of the way along the road. That’s fine. Good teams will talk about that journey. And that will build confidence.
Customer discovery is a fundamental part of the startup journey. All it means is talking direct to people who may buy your product. And finding out what their needs are. So that feeds into the design of your product. The phrase was coined by Steve Blank in his best selling book Four Steps to the Epiphany. You can read the reasoning and the theory in the book.
For me this is a make or break question. Customer discovery is execution not strategy. I don’t expect to see it written down. I do love to hear smart people describing how they are reaching out to customers. What feedback they are receiving. How the dialogue is changing their product strategy.
Who to talk to
I don’t care much if you have read the book. What counts is the practical stuff you are doing to build your business. The first question is who are the potential customers that you are trying to talk to. The base answer to this is the people who have the problem your product is trying to solve. And for a consumer business this is straightforward.
In a B2B SaaS business this can be the first point of confusion. The people who have the problem will be end up being users of your product. They may be different from the people who write the cheques. Even in a small business the owner may see a difference between using a tool and buying a tool.
As a result, it is easy to go wrong right at the start. Many startups (and many advisors) will gloss over the difference. they will pick companies as the target customer. This looks neat. Now users and buyers are the same people. And if the companies are large or well known, a nice target list will impress investors.
Neat but a mistake. Companies don’t talk. So they are impossible to listen to. Worse, people in companies do talk. Speak to the wrong person and you will be hearing the wrong message.
One option is to use a standard model to identify the right person in a company to talk with. There are several of these based on decision makers and influencers. Organisational roles. Job titles. In my experience this approach does not work. Every company is its own world with its own unique culture. Even within one organisation, different products may be chosen and bought by different routes.
I prefer a map building approach:
The risk with this approach is that you invest a lot of time for no reward. If you end up selling to large enterprises this will always be a challenge. In the early days you have little to lose. Handled well, every meeting will add to your understanding. And improve your chances of finding good paying customers.
The deeper you go the greater the risk. There is no complete answer to this. The best advice is rigorous honesty. Be clear about the progress you are making. Be prepared to walk away if it becomes evident that your product will not work for that customer.
How to find the right people
A journey, as Mao sort of said. begins with a single step. To chart a path you need to find the people who have the problem you are trying to solve. This can seem like a scary task when you first start your SaaS business. Where to begin?
Having the conversation
If you are sticking with me you will now be working towards 30 or so introductions. The warmth will vary but they are at least not stone cold. Your objective is to have a conversation with as many of these people as possible. A discussion about the problem your business is going to solve.
This discussion can be quite informal and maybe short. A quick 10 minutes at a conference or meetup can be enough. You will not need an agenda (unless you are asked to provide one). But you do need to do 3 things:
These principles apply however you are introduced. If your contact makes a personal introduction, framing should be your first words. If you strike up a conversation setting the frame is the switch from small talk to business mode. If you call the person it is the way you describe the purpose of the call. It also forms the structure for any introductory e-mail that you send.
If you want to know more about this, read The Mom Test by Rob Fitzpatrick. If you are confident you know what to do, read it anyway. There are few books that I consider essential reading but this is one. If it contradicts what I have just said, follow Rob’s advice.
Keeping track - The anti-CRM
As soon as you starting talking to potential customers, you are building your business. The most tentative chat about solving a problem is part of that process. The connections you make will form part of the future of your SaaS. It doesn't matter if they never buy or use your product. They will be the start of the thread that leads you to your first paying customers.
So you should keep a record of who you talk to and where it leads. A whole sector of the software industry has grown up around doing just that. Its called CRM. It covers the spectrum from spreadsheets to the largest B2B SaaS company in the world.
The trouble is that it is a false model. The initials stand for Customer Relationship Management. But the software is based on a top down management of the sales pipeline (or funnel if you prefer). In essence the software does not do what the name implies.
The reasons for this would make a whole book. The point is to think different. When you are in customer discovery mode the issue is simple. You are nowhere near ready to sell. Even if your contacts want to buy. Trying to track these conversations in a sales funnel truncates all the value.
Concentrate on gathering the lessons learned. And the connections that are growing your network. Make note of demographic information like roles, titles, interests and so on. You can use this to help build up personas when you are ready for your marketing campaigns. All this will be much more of an asset than an artificial pipeline.
Don't stop exploring
Customer discovery is about execution not strategy. It is a lifetime process. The biggest companies with the longest established products are still doing it. Still talking to customers and potential customers. Still learning and building better products. Delivering the solutions their customers value.
The next part of this guide will look at how you use the information you have gathered. For now, remember three things:
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.