9 Deadly Sins Startup Founders Commit Most

small business pitfalls

Small business owners need to carefully evaluate and not make assumptions. 

 

 

For most startups, these nine flawed assumptions are the most toxic of all.

Here are the 9 deadly sins for start ups:

1. Assuming “I Know What the Customer Wants”

First is the founder’s unwavering belief that he or she understands who the customers will be, what they need, and how to sell it to them.

Any dispassionate observer would recognize that on Day One, a startup has no customers, and unless the founder is a true domain expert, he or she can only guess about the customer, problem, and business model. On Day One, a startup is a faith-based initiative built on guesses.

Yet the traditional product introduction methodology has founders take these many business model guesses as facts and go design a product and start spending money to build it on a race to “first customer ship”—all before talking to a single customer.

To succeed, founders need to turn hypotheses or guesses into facts as soon as possible by getting out of the building, asking customers if the hypotheses were correct, and quickly changing those that were wrong.

2. The “I Know What Features to Build” Flaw

The second flawed assumption is implicitly driven by the first. Founders, presuming they know their customers, assume they know all the features customers need.

These founders specify, design, and build a fully featured product using classic product development methods without ever leaving their building. But wait—isn’t that what startups should do? No—that’s what companies with existing customers do.

The waterfall development process proceeds sequentially and without interruption for as long as a year or two. Progress is measured by each new line of code written or new piece of hardware built throughout the process until the product is released.

Yet without direct and continuous customer contact, it’s unknown whether the features appeal to customers.

Fixing the inevitable product mistakes after building and shipping the entire product is costly and time-consuming, if not deadly. It can render the product obsolete by launch.

Worse, it often causes huge engineering waste, with hundreds of hours of work tossed aside, or tons of code cut and dropped to the floor, when customers say the new features aren’t ones they care about. Ironically, startups were often crippled by the very methodology they traditionally used to build new products.

3. Focus on Launch Date

The traditional product introduction model focuses engineering, sales and marketing on the all-important, immovable launch date.

Marketing tries to pick an “event” (trade show, conference, blog, etc.) where they can “launch” the product. Executives look at that date and the calendar, working backward to ignite fireworks on the day the product is launched. Neither management nor investors tolerate “wrong turns” that result in delays. In fact, traditional engineering schedules have test cycles with the names alpha, beta, and release but rarely allow time to improve the product.

They’re still geared to putting out the original product with minimal bugs, though.

The product launch and first customer ship dates are merely the dates when a product development team thinks the product’s first release is “finished.” It doesn’t mean the company understands its customers or how to market or sell to them, yet in almost every startup, ready or not, departmental clocks are set irrevocably to “first customer ship.”

Even worse, a startup’s investors are managing their financial expectations by this date as well.

The chorus of investor voices says, “Why, of course that’s what you do. Getting the product to market is what sales and marketing people do in startups. That’s how a startup makes money.”

This is deadly advice. Ignore it.

Focusing only on launch results in a “fire, ready, aim” strategy that ignores the customer discovery process— a fundamental and generally fatal error. Obviously, every startup or company wants to get a product to market and sell it, but that can’t be done until the company understands who it’s selling to and why they’ll buy.

The forced march ignores the iterative loop that says, “If our assumptions are wrong, maybe we need to try something different.” It shuts off the “build, test and learn” flow and assumes that customers will come based merely on good engineering execution.

Time after time, only after launch does a startup discover that not enough customers visit its website, play the game, bring their friends, or convert to orders. Or it discovers that early customers don’t scale into a mainstream market, or the product doesn’t solve a high-value problem, or the cost of distribution is too high.

While those discoveries are bad enough, the startup is now burdened with an expensive, scaled-up sales and marketing organization—effective only at burning mountains of cash—that’s now trying to figure out what went wrong and how to fix it.

Next page- Deadly sins 4 through 6 for start ups

Pages

About the author

Bob Dorf

Bob Dorf is among the world’s leading Lean Startup and Customer Development experts, who trains and coaches startups throughout the world, with a particular focus on Latin America.  Bob co-authored the Startup Owner’s Manual, a global bestseller, with startup legend Steve Blank. Now in 18 languages, the Manual details every step in transforming an idea into a repeatable, scalable, profitable business. Bob focuses particularly on training programs for the startup educators, coaches, and investors, and has done so repeatedly in Mexico, Colombia, Brazil and many more. Hes also an Entrepreneur-in-Residence at Columbia Business School. Earlier, Bob founded seven startups--“two homeruns, two base hits, and three tax losses.” His 30+ angel investments delivered 7 IPO’s and six disasters. Learn more at www.bobdorf.nyc or contact bob via bobdorf@gmail.com

Website