Monthly Archives: January 2015

Customer Development Interviews

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A new book by Cindy Alvarez about customer interviews reminded me that it is often important to review the basics of our tradecraft.

There are a number of important points to consider when reaching out to potential customers. In the Lean Methodology, it is essential to complete customer interviews before building your first minimally viable product. Ongoing interviews with clients also helps you to stay in touch and cement relationships with clients as well.

It is best to interview someone face-to-face. Clearly, that is more time consuming approach, yet more effective than Skype, telephone, or online interviews. A key component of these interviews is the observation of body language. That observation is lost with anything less than face-to-face meeting. Video conversations only capture part of the picture, and the nuances of observation cannot be completely captured.

The second important issue is to help the interviewee get past the politeness factor. No one wants to deliver bad news. Your goal is to make them feel comfortable. There are two ways past the politeness factor. The first is to change the way questions are asked. Asking, “What do you dislike about the product?” makes it difficult to yield honest results. Instead, asking “How would you improve this product?” frames the question as a respectful call for assistance. Everyone wants to help. No one wants to be impolite.

Cindy Alvarez starts just about every interview with four basic questions:

Tell me about how you do __________ today?

Do you use any other tools or have any specific tips or tricks you use to help?

Is there anything specific that you always do before or after you do _______?

If you could have a magic wand and be able to do anything else that you can’t do today, what would it be? (Forget about whether or not it’s possible, just anything.)

These questions are open-ended and allow for understanding customer behavior and activity. It is also crucial that there is not a single mention of your product.

Here are a number of other tips to use during customer interviews:

  • Try to have two people attend
  • Work from an outline of 3 – 5 questions
  • Focus on real behavior not hypothetical
  • Shut up
  • Probe
  • Don’t overstay your welcome
  • Debrief the same day
  • FOLLOW UP!
  • Work to their Schedule
  • Disarm the politeness training
  • Ask open ended questions
  • Don’t influence
  • Ask the Right Questions
  • Frame the Questions Correctly
  • Parrott back
  • Get Psyched to hear things you don’t want to hear
  • Ask for Introductions

The goal of your interviews is to position the interviewee as the expert. A good interview avoids yes/no answers, and gives potential clients an opportunity to tell a story – one that may cause them to think of related problems they’re having, or may trigger more questions for you to ask later.

Remember, your goal is to determine how your customer is currently dealing with specific tasks.  What do they like about their current solution or process? Is there some other approach that they have taken in the past that was better or worse?

Attempt to discover what they wish they could do that currently isn’t possible or practical. How would that make their lives better? Who their organization is directly involved with addressing such approaches? How long does it take to make a decision?

Your interviewees’ feelings and state of mind are also important. How do they feel when they are performing this task?  How busy/hurried/stressed/bored/frustrated? You can learn this by watching their facial expressions and listening to their voice as they answer your questions. What are they doing immediately before and after their current task? How much time or money would they be willing to invest in a solution that made their lives easier?

There is a lot more to being good at customer interviews. Like most anything else, practice is crucial to getting better.

Managing Risk and Managing Decisions

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Early in my career I worked in investment banking and international banking. So, later on when I taught finance I reflected on the issue of risk, and the basic elements of financial risk that all business ventures should consider:

  • Understanding the types of risk;
  • The fundamentals of risk; and
  • Managing the risk.

The fundamentals of risk management involve:

  1. Identifying the risks
  2. Measuring the potential impact
  3. Deciding how each risk should be handled.

In a recent Harvard Business Review article on business model innovation, I noticed a commentary on marketing. This particular article contained a major section about when to make key decisions and identifying who should make those decisions. It occurred to me that the elements of risk are almost identical to the innovation model. Both focus on reducing risk in a venture.

In a past blog I discussed the garbage can model of decision-making, and focused on being novel in decisions. Today, I am looking at reducing the risk and uncertainty inherent in any startup.

Risk identification is a process that systematically and continuously identifies current and potential risks that might have an adverse affect on a startup. The impact of the risk is affected by both frequency (lots of events) and severity (potential big losses). Most companies don’t worry much about frequent small losses. Office supplies disappearing or the local candy store missing a few small low cost items are two examples of a small loss. However, with severe losses, many organizations take precautions to protect events from occurring. Examples here might include large ticket items missing in the isles of retailers or a few items being chained down so that only department managers can help you try on the expensive goods.

In decision-making, the risk inherent about when key decisions should be made is often due to the lack of sufficient information to reduce the uncertainty. Strategies to deal with this issue may include:

  1. Postponing the decision. Sometimes decisions appear urgent but are not.
  2. Splitting up the decision into a series of real options. Break the decision into small bite size pieces this reducing any significant investment.
  3. Changing the order of decisions. Sometimes a client may ask for customization that may not benefit the strategic direction or value of the organization. In response, the startup can change the sequence to only payment upfront or with proof of performance before investing in the customization.

The CEO may not always initiate all important decision-making. Empowering employees is a very effective way to deal with every day minor decisions. If the decision is too important to delegate, then another way to manage the risk is to consult with a board member or trusted advisor. Even then, always try to find the HIPPO (the industry’s Highest Paid Person’s Opinion). Delegating up or outsourcing may be the best option when dealing with risk issues.

Managing risk and decisions can also be accomplished through insurance, or outsourcing. Startups often hire distributors and/or transportation companies to take on the logistics of moving product not only because it is less expensive but also because these outsource companies have the know-how to manage these specific operational risk.

In startups there are other types of identifiable risk that may include market risk, supplier risk, default risk by clients and others that are usually addressed in the planning process. Managing risk and managing decisions travel in lock step with similar processes. However you manage risk, make sure the process is around a strategic framework and one that allows for continuous monitoring.