Four Step to the Epiphany

Four Steps to The Epiphany is a book about a structured methodology, customer development, for early stage startups to follow. Customer development lies somewhere between product development and sales. The premise is that “Products developed with senior management out in front of customers early and often - win.” It pays lip service to consumer products and products in existing markets but is primarily for business applications that are breaking new ground. It contains the seeds of several popular ideas like iterating, pivoting, and minimum viable product.

Ground Breaking Ideas
The book contains lots of radical ideas... for instance, you should build your initial product to suit the needs of your early customers, not the mainstream market. Early on you shouldn’t hire any experienced sales people that are used to executing a sales plan, because there isn’t one. Think about those for a moment... it’s counter-intuitive to think your initial product may not be suited to a mainstream customer, but think about the Apple I. What if you pitched the idea that you don’t need a kick ass sales person. However, the most interesting in my opinion is that you should sell your product to 3-5 visionary customers months or years before it is completed without a professional sales team. Think about that.... Selling customers a product that doesn’t exist. I think you got to have real balls to pull this off... Here is how to do it:

The right customers
One key aspect is to find customers that are forward thinking. These type of customers are not the mainstream consumer. They are risk takers. They need to have the problem that your product will solve. They need to be aware of the problem. They need to be looking for a solution. They need to have a budget. It would be nice if they are working on a home grown solution. You will have to meet a lot of people before you find them. Why would they do this? Competitive advantage, bragging rights, political advantage. For more about the psychology of early adapters read the Tipping Point (which Steve Blank cites as an influence).

How do you find Visionary customers?
You will need to find potential customers that don’t know you and are willing to give you their time. You need to start with your network and get a reference. Prepare an email that describes your company, get a person to forward it to their contact. Follow up with a phone call, try to set up a meeting. Not to sell, but just to understand how they solve the problem now. In order to give them an incentive frame it as an opportunity for them to find out where the technology is going. FSE says you and your founders should make 10 calls a day and try got get 3 meetings a day. Expect rejection and if people turn you down try to get a referal. Once at the meeting, ask open ended questions... like “How much does this problem cost you?” “What are 3 things I need to learn before I leave. Use these meetings to get customer feedback and adjust your product as needed. The first meeting is where you discuss the problem and then you follow up with one where you discuss more of the details of your solution. You iterate this process until you get to a solution you can present, and then close.

Here are a few things you need to have to close a sale without a product. First of all, you need to be solving a problem that you know they desperately need based on your previous meetings. You will need to disarm obstacles, like people who have a stake in the current way they solve this problem. You may need to convince them they are not in the software business and don’t need to maintain a home grown version. There is a lot of preparation and product development but by time you go to close this sale here are some of the things you need:
You need to instill confidence, the customer will have met senior management and possibly the VCS.
You will need to hire a “closer”, a sales person that can help close the deal and get a signature.
You will need a dummy demo... a presentation.. sales literature, ROI white papers, etc.
You will need a delivery date, and pricing.
You can be flexible on terms, i.e. no payment till deliver.
However , you can not give away the product for free, because you will not validate your sales road map. Also, you can’t make promises to customize features for the different customers, because you won’t be validating your product.

My Experience/Your experience...
The idea of selling before it’s complete is consistent with my experience. I have worked at several software companies that began as consulting engagements and turned into products. I’m curious to hear your stories... and thoughts on selling before you deliver a product.


adeel said...

Isn't that referred to as vapor ware? I guess this also helps explain one of the many reasons why so many software projects/products do not see the light of the day and never really make it to market. My take is that if the idea or the eventual product out of the idea is so revolutionary it will not need selling, it will sell itself. Apple products are case in point, Facebook, youTube and twitter come to mind from the software world.

Andrew said...

Yeh, if you miss your delivery date, people will consider it vaporware. That is a big risk.

This book is about early stage startups. Steve Job sold the first 50 Apple Is to a computer store, the byte shop, before they were made with only a prototype.
history of apple

Facebook was also sold before it was written... to the winklevoss twins ;-)