Brant Cooper - The Entrepreneur's Guide to Customer Development - from

!e Entrepreneur’s Guide to Customer DevelopmentA conversation between Brant Cooper & Moe Abdou

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The Entrepreneur's Guide to Customer Development Brant Cooper with Moe Abdou

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About Brant Cooper & Moe Abdou

Brant Cooper

Brant Cooper is an author, speaker and entrepreneur who possesses over 17 years of success in bringing high tech products to market. He digs directing the strategy, design, and launch of key technology offerings by leveraging expertise in technology, marketing, and business development. Brant has served as a Marketing and Product Management executive for several start-ups and currently operates as an independent consultant in San Diego.

Moe Abdou

Moe Abdou is the creator of 33voices — a global conversation about things that matter in business and in life. [email protected]

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Good afternoon. This is Moe Abdou. I am totally excited today to have Brant Cooper with me. Not only has Brant written an awesome book called The Entrepreneur’s Guide to Customer Development. I think it’s safe to say that this has been your calling here over the last several years which is basically to help equip entrepreneurs with tools specifically in that marketing arena.

That’s right on. Thanks for having me. I’m happy to be here.

It’s awesome to have you with us. I want to start by something that I mentioned to you that I’m a real believer in. I remember Peter Drucker once telling me that business is about marketing and innovation and nothing else.

From your perspective, you have become an influential voice to entrepreneurs around the world; first, give me your take on that. I’m a real believer that if you can’t market, you don’t have a business. What are your thoughts on that?

I think that marketing is obviously key. I’m sort of amused often by new nomenclature that comes out about marketing — you need to do viral marketing now or you need to do guerilla marketing.

The basics of all marketing is word-of-mouth marketing. Even if you’re running an advertisement then you’re the mouth and your audiences are the ears and you’re spreading the word about your product. So that’s the basis with all marketing — word of mouth marketing. How else can you sell a product other than having one person tell another person about your product? It’s the fundamentals of business.

I totally concur with you. Why then is it so difficult for entrepreneurs in particular to crack this marketing code?

I think that depending on the background of the entrepreneur, marketing has come to mean so many different things that the fundamental question, what’s the right marketing for me in my business, in my product, is hard to find within all of the noise.

Just in the last five years; right now, it’s social media marketing. Everything is about social media marketing. You can’t go on the internet,


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you can’t go on Twitter, it’s even probably on your evening news; these calls to action that says you better go do social media marketing or you’re going to fail.

These types of things come up every several years. Entrepreneurs are sitting there going, that’s a lot of money I’m going to start sending out the door for all of these must have marketing programs. What am I going to get out of it? How do I know it’s right for my business?

I think the problem is there is just a lot of noise out there. Very smart entrepreneurs are nervous about what’s the right tact that they should take for their particular business.

Obviously, the book that Patrick and you wrote, The Entrepreneur's

Guide to Customer Development is a great step forward for anybody who would pick that up to be able to answer that question. Give me the conspectus, the 50,000 foot overview of the concepts in the book.

Customer development is a framework, a methodology developed by a serial entrepreneur named Steve Blank who basically looked at the world and said; of the successful companies, here are the common things that they did when developing their product and their marketing and their sales which made them successful.

It’s not really a step by step guide. It’s not an airport business book that simply says just go out and go do it, and work hard. Those things are important.

The fundamental principles of customer development are: number 1, what you believe to be true about your business when you’re first starting out are actually likely to be purely guesses. They are just business hypothesis. They are untested. Though it’s great that you believe in yourself and you believe in your idea; they are, after all, only guesses.

The second fundamental principle is that the ones that hold the true answers, the truth to those hypotheses are your customers. The way you validate your hypothesis is by asking your customers.

It seems so incredibly obvious that you could go into just about any hi-tech business for example, though this applies to any business. You could


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go into any high tech business and go to their executive management team meeting; and sitting around the table will be your CEO and you COO and your chief marketing officer and your chief products person.

They will sit around the debate for hours what the right move is, what the right marketing strategy is, what the right business model is, what’s the right sales strategy. Whoever I guess is the most convincing wins the argument and often, that becomes their strategy.

The thought of actually engaging with their existing customers or their potential customers to try to validate what is the right method, rarely crosses the minds of many entrepreneurs. Though we get into some more details about how one can do that most effectively, those are actually the two most fundamental concepts of leading startups in customer development.

Your business hypotheses are just guesses so don’t automatically just act on them and believe them, go out and test them with your customers.

Let’s discuss this whole issue from the context of you starting your next business. So you’re kind of in this marketing strategy brainstorm session with your team and you guys are talking fundamentally about the first steps towards identifying those customers or validating those hypothesis. Walk me through that process. What are you guys discussing in that session?

The way I advocate is, let’s draw a picture of what we think our business model looks like in the ecosystem that is surrounding that business. Who are our partners? What is our distribution method? Do we think it’s going to be the most attractive distribution method? Are there any partners that we have that are supplying technologies? Do we use retail stores or value added resellers, our go-to markets? Who are all the players including the customers and who are the different types of customers, maybe you have three or four different market segments identified. Put all those up on a white board.

The second step would be, what is the value profit our product is bringing to each one of those players? People often think of the value prop in terms of their customer but actually anybody that’s going to participate


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in your ecosystem has a value proposition. If they’re not getting value they won’t participate in the ecosystem. So let’s identify all of those.

Next, which of those players, which of those entities are mission critical for your business? If your value-added resellers went away would that kill the business? Sometimes in a simple business that might just be that you have yourself. You’re going directly to a customer and everybody else starts to go away and that’s the only mission critical entity that I have left.

Another more complicated business model is you actually have to have that distribution system where you’re creating an online market place for example and you have to have two parties that are coming to that site concurrently in order for the business to exist.

So identifying which are the ones that are mission critical and what is the pain that we’re solving for them, is the key assumption that you’re trying to unearth. To that point then, what is the minimum number of features that I need to have in my product or service, the minimum number of features in order to provide that value prop for that mission critical entity.

So again, in a simple example where you are a product company selling directly to a customer, what is the minimum number of features I need in that product that will make that customer pay money to validate that that product is solving the problem that you set out to solve.

That’s a great question. If there is one area that I think most people, I think almost do the exact opposite, is really this whole minimum number of features piece. You guys call it MVP in the book. Let’s talk a little bit about the thinking that goes with that. Does that kind of speed the to-go market process a little bit and start to test so we can iterate on that? Is that the thinking behind that strategically?

That’s right. Entrepreneurs often have a fear that if they get their product without out everything that is required — so you’re taking a guess at what your minimum feature set is and say it falls short. There is a fear among some entrepreneurs that that was their only shot. Now, they’re going to have tens of thousands of people visiting their website or trying their product and it’s not going to have it and they have really blown it.


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In reality, however, it’s not so easy to actually get that number of users. So if you have identified through your customer development that you have a set of customers that through your conversations with them have found that they are in fact suffering a problem or they have a particular passion that you’re providing products or services to, then you’re showing them this minimum viable product. You want to get it out in front of them as quickly as possible to validate that you’re on the right path. If you’re a little bit short then you only have a little bit of ways to go and you’re actually able to test with them what it is specifically that’s missing.

One of the key things here is that what you’re trying to unearth is passion. You’re trying to unearth passion inside your customer. What is it that they must have in order to become a lifelong customer for your products?

Finishing the product and just throwing it over and ship and not having a relationship with your customer doesn’t allow you to establish that. Get that product out as quickly as possible, find out who your passionate customers are, nail the products for that particular constituency and then you’re on your way.

I had a really interesting conversation with somebody a couple of weeks ago and I was talking about your book with him. I talked particularly about this. One of the analogy that was used was it sounds like kind of the Microsoft path to product development. And then he made a comment, I tend to think more of the Apple path to product to development. Let’s perfect the product first and then we get it out there. As opposed to Microsoft’s old ship it metaphor and the product gets out there knowing that it has issues in it.

One of the comments I made to him is that certainly there is probably a little more perfection from Apple’s perspective. If you just see the product evolution that’s taking place with Apple, they still have the same thought process, at least it appears, it’s just they approached it a little differently. Would you agree to that?

I think that that’s probably right. I actually don’t know what the machinations are behind the scenes. I think that we love, in our society — I think it’s a human characteristic that we like to create stories by


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looking back and sort of weaving together a tale of the overnight success or the genius behind product X. I’m sure some of that exists.

It’s also a story and it’s one that we were drawn to. We’re drawn to those types of narrative. I actually don’t know the Microsoft story and I don’t really know the Apple story behind the scenes but I’d like to make a couple of smaller points.

One is that when you’re getting the minimum viable product out the door, that’s not the same as doing a marketing launch. You’re not going in and doing lots of PR campaign. You’re not running advertisements trying to test that minimum viable product. You’re actually trying to test that with a core constituency of early adaptors in order to nail the problem, in order to validate that you have actually built the right solution.

The example given from Microsoft is they are launching products worldwide that are buggy. Without judging either way, that’s sort of not what I’m advocating. In the Apple example, we don’t really know how much usability testing or customer involvement they actually have during the development of their products. We can’t really say that they don’t do it that way.

Certainly, Apple put a PDA out, one could call an iPhone predecessor, the Newton, a long time ago and that wasn’t the most elegant product in the world. Even that was considered perhaps that was an early MVP.

You know what’s interesting; you mentioned something that triggered another question for me. You talked about this whole customer discovery piece. I think there is a lot of misconception out there between customer discovery and market research. Do you see that the people that you come across, entrepreneurs in general obviously, that people mistake what you say customer discovery means and just this whole notion of market research?

I do. It’s one of the primary points I try to make about the whole customer development process. I think that large consumer good companies have done “real” market research for a long time and that actually can be done correctly. It can be very expensive and it could be very fruitful.


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Somewhere along the way it seems to me for many founders, for many startups, market research became go find evidence that support what you already believe. If you’re going to go and take your idea to an investor, you want to convince that investor that you have thought about all of these things and that there in fact is this huge market out there. So you go to the trade magazines and you do some back of the nap and figuring and try to go out and find evidence to support your hypothesis.

Steve Blank’s Customer Discovery is not taking that approach at all. It’s trying to answer the question, if you were going to go and work on this product for two years then you’re going to spend all of your time and all of you money working on this product, wouldn’t it be a good idea to figure out whether anybody actually wants this product before you waste that two years of time and money?

That’s really what customer discovery is about. It’s about going and finding out if anybody actually has the problem that you’re trying to solve.

That’s very well said. People who would be listening to this or reading the text that have not read Steve’s book, it’s a remarkable entrée. I think really more so to just the whole entrepreneurial mindset and the thinking. I’m curious, in your work with Steve and your work with entrepreneurs, is there a common trap that you find most entrepreneurs have specifically in this niche, in this genre of marketing?

I think that the trap that I see most often is — and I have written a controversial blog post about it — it’s the going for the PR too early. Typically, entrepreneurs want to get the word out. They are in love with their product. They think they are solving the right problems.

What they really need to do is, I need to get awareness. Everybody talks about awareness. I need more eyeballs. I need to grow the number of people that are looking at my product and downloading it.

The problem with that is that if you haven’t nailed it yet, you really do blow your only opportunity. It’s sort of called the TechCrunch bump now for internet entrepreneurs. You get your products listed in TechCrunch. They write a little article about it. Suddenly you’re getting 10, 20, 50 thousand hits a day on your website.


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Over a few months, that number dwindles down and then what you discover is that your retention numbers were really low. Why were your attention numbers low? Number 1, it could be because the audience at TechCrunch wasn’t the right audience for you. Number 2, it could be because you weren’t really solving the problem or you weren’t solving it well enough.

You really want to nail that you have nailed the value proposition; you have solved the problem before you go out and get this massive PR.

A couple of caveats to that; number 1, I’m a strong advocate for PR when the timing is right. Number 2, it doesn’t mean you can’t do any PR at all but you’ll do need to get some amount of user acquisition in order to test and validate their product and their value prop but you really don’t want to go and do the campaign.

I think that a lot of PR agencies, it’s a very competitive field. They need more eyeballs. They need more work. I think they are often pushing entrepreneurs to do these massive campaigns way too early in the lifecycle of their business.

Brant, you’re talking, solve the problem, nail the value prop first through the customer discovery phase, correct?

That’s correct.

Tell me the most important questions that entrepreneurs should be asking themselves regarding marketing?

I think that they should understand that not all marketing fits all businesses. I go back to the example of the first one of media marketing. You could go and do Facebook ads or create a Facebook page and spend a fair amount of time and money doing that but you’re core constituency are retired baby boomers that never go and visit Facebook.

That’s a rather obvious example of you need to market where your market segment is. That’s a question that all entrepreneurs can ask themselves. Instead of relying on a consultant or a PR company or a social media rockstar, ninja or guru; instead of asking them, you can ask your customers yourself. Are they active on Facebook? Do they use Twitter?


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You find out directly from your potential customers what is the most appropriate marketing vehicle to reach them.

It’s obviously hard to talk about marketing at all and you brought it up several times without this whole social media craze. That seems like we’re going to at least be inundated with for awhile. What role does it play? How have you seen it impact marketing? I know that it has certainly impact the thinking behind it. You just made a great point is that not all marketing fits all businesses.

I don’t want to sound like I’m bashing social media at all. I think it’s actually a huge opportunity. It really is revolutionizing marketing.

Let me give a theory as to why. The first thing that entrepreneurs should understand is maybe a little bit about market segments and hopefully this doesn’t get too technical. Market segment doesn’t mean a user’s profile. The demographics might be important but they might not be.

A market segment is a group of users that share the same problem but who also reference each other. If they knew this other person, they would look to that person for advice, for recommendations on products. Third, that they actually would have access to those people. This concept really comes from Geoffrey Moore’s Crossing the Chasm which is another book I really believe all entrepreneurs should read.

The example is that you could have a doctor, a surgeon, in a hospital in Boston who has a particular product and is in love with it and would recommend it to all of their peers. There maybe a doctor in Brazil who actually would also love to have that product but doesn’t know about it.

Those two doctors, if they knew each other, would definitely reference each other. They’re both in the same field and they have been from respectable medical institutions and they’re the same level of doctor etc. That the Boston doctor uses that instrument would be important to the Brazilian doctor.

If they don’t have access to each other however, if they are not able to see that one recommends that product, then they are in different market segments. The reason is because you would have to use different marketing tactics to reach one and then reach the other. This is where


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social media comes in. Perhaps to a LinkedIn group now, those two doctors do have access to what each other are reviewing products about or recommending.

The major advantage of social media is that suddenly your market segments are that much larger because the scope of relationships has grown globally now. What was once perhaps a medical chapter or an online forum perhaps or a user group existed for a particular region or a particular topic — once that was a market segment, now it’s perhaps global because these different groups have connections to each other.

That makes so much sense. How important is it for a startup in the early days to have a marketing specialist on their team? Is it something that you would recommend that they outsource initially?

I think it really depends on the business and where they are and what the strength is of the founder or the CEO. I think at the early stage, the founder needs to be actively involved in marketing and understanding what’s going on and providing their input. If they are the ones that hold the key business assumptions then they should be the ones that are out getting those assumptions validated.

I think that early customer relationship management is really important. I think that having a marketing person that is able to communicate sort of more day-to-day activities with customers and potential customers then I think that that’s valid.

At some point, as an entrepreneur, if you’re out raising money or you’re doing other things then you might need to start thinking about some support with your customer development and starting to figure out how you’re going to acquire users.

One of the key elements of customer development is that you are also figuring out how to reach and convert your customers which is typically a marketing activity. When you get to that stage, then it probably makes sense to bring on a marketing expert.

I highly recommend however that the marketing expert you bring on first is somebody who is a doer and not just a manager. You need somebody that’s actually going to again be forming those relationships with those


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customers and validating the core business assumptions and needs to be heading the learning process. So they have to be very hands on and not just a people manager.

Is there a startup out there that you have been exposed to whether it’s through your efforts directly with them or just observation — is there one whose marketing has particularly impressed you?

There is a company who is actually in the marketing analytics space that I think is kind of an interesting story. I think KISSmetrics has done a really good job. The other one that I would highlight would probably be HubSpot.

I think the examples here that I think are important are the amount of giving that they do. To participate in today’s social media marketing, you have to be a giver. Or how Howard Lindzon, CEO of StockTwits, put it, he says, it’s easy to make withdrawals, you have to be making deposits. He’s really talking about making deposits into the social media bank, and that means that you’re providing value.

So you’re not just trying to extract it, you’re actually providing value. You see that quite a bit with both KISSmetrics and HubSpot. They are out there giving free advice. They are linking to critical articles that you should be reading regardless of whether they have been the ones to write them. They participate in their local startup ecosystem. Several of the executives are visible. Not just somebody with the VP of marketing title. It’s the CEOs and it’s the chief technical people.

I think it’s a pretty good model going forward that everybody is out there and everybody is providing value and you create the feeling that you’re a part of something larger than just your company. That it is the ecosystem that matters. It’s all the other startups that matters.

It’s one of the other things I think that social media is bringing is a collaborative atmosphere. We’re all going to help each other. We compete down the road but right now it’s about everybody helping each other and growing the size of the pie.


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Awesome examples. I’m not as familiar with KISSmetrics as I am with HubSpot. I think that they have done a fabulous job at adding value. I think their whole value proposition is about that.

I agree.

Brant, other than your book, I also want to mention Steve’s book, The

Four Steps to the Epiphany. You also mentioned Geoffrey Moore’s book Crossing the Chasm. Is there one book that you think has had the greatest impact on you from a marketing perspective specifically in this whole startup deal?

I think that probably Crossing the Chasm is the one I read first that had a tremendous amount of impact on me for basic marketing principles. I think The Four Steps is sort of this generation’s Crossing the Chasm. I think that the principles that are laid out in there are flexible. Anybody can modify them for their business. If one follows that, there is certainly no guarantee of success. We’re trying to minimize the risk here, right?.

I was late to the game but I recently read Christensen’s The Innovator’s

Dilemma. I think that’s a great read. I would highly recommend that book as well. Maybe one other one if I threw it in there that I think captures maybe the human element to all of the traps that we fall into in our thinking is The Black Swan by Taleb.

That’s a really, really interesting book. Brant, brilliant insight. How can people learn more about what you’re doing? How can people who have not had an opportunity to get exposed to your work connect with you guys?

Both Patrick and I, we try to be all over the place. We’re very accessible. I blog at www.Market-by-Numbers.com. People can email me there, [email protected]. I’m on Twitter. brantcooper is my Twitter handle. The book is available at www.CustDev.com as well as on Amazon both for print version and Kindle. That again is The Entrepreneurs Guide to Customer Development.

Patrick actually Tweets at www.Vlaskovits.com. We are always looking for speaking engagements. We’re in Boston this week. We’ll be in Michigan and Vancouver in May. We love to work with startups and love to


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talk to founders and entrepreneurs. I would just say don’t hesitate to reach out to us.

You guys are doing some really awesome stuff. I really appreciate your time.

Thank you for having me. It’s a great discussion.

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