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The 3 Data Streams That Every Founder Needs

BY STEVE BLANK

Gathering real-world feedback from customers is a core concept of Customer Development as well as the Lean Startup.

But what information to collect?

Yesterday I got an email from an ex-student lamenting that only 2% of their selected early testers responded to their on-line survey. The survey said in part:

The survey has 57 questions, the last three of which are open ended, and should take about 20 minutes to complete. Please note that you must complete the entire survey once you begin. You cannot stop along the way and have your responses to that point saved.

If it wasn’t so sad, it would be funny.

I called the founder and noted that there are SAT tests that are shorter than the survey. When I asked him if he actually had personally left the building and talked to these potential customers, or even had gotten them on the phone, he sounded confused, “We’re a web startup, all our customers are on the web. Why can’t I just get them to give me the answers I need this way?”

Customer Development suggests that founders have continual and timely customer, channel, and market information. Founders need three data streams or “views of information” to truly understand what is going on in their business:

  • First-hand knowledge
  • A “bird’s-eye” view
  • The view from the eyes of customers and competitors

1. First-hand knowledge

First-hand knowledge is “getting outside the building” and talking to potential or actual customers. Customer Development proposes that the best way to get customer data is through personal observation and experience — getting out from behind your desk and getting up close and personal with customers, competitors, and the market.

Founders of tech companies often confuse web metrics like A/B testing and online surveys as the entirety of first-hand knowledge—it is not.

In fact, this mistake can be a “going out of business” strategy.

Metrics tell you that something is happening, but not why. A/B testing can tell you that one something is better than another…but not why. Getting survey responses back from customers will give you part of the answer, but you can’t watch their pupils dilate or hear the intonation of their voice. And without that, it’s just not something I’d build a business on.

Of course you need to collect metrics. It’s just that without having founders “get outside the building” you are missing a key point of Customer Development — the numeric data you collect may be blinding you to the fact that you’re more than likely working to optimize the wrong business model. Customer needs are non-deterministic.

2. Bird’s-eye view

The second picture founders need is a synthesized “bird’s-eye view” of the customer, market, and competitive environment. You assemble this view by gathering information from a variety of sources:

  • web sites
  • social media (Facebook, Twitter, blogs, et al)
  • sales data
  • win/loss information
  • market research data
  • competitive analyses
  • a/b tests
  • customer survey data
  • …and so on

From this big-picture view, founders try to make sense of the shape of the market and the overall patterns in the unfolding competitive and customer situation. At the same time, they can gauge how well industry data and the actual sales match the company’s revenue and market-share expectations.

Just remember that most market research firms are excellent at predicting the past. If they could predict the future, they’d be entrepreneurs.

My test for how well you understand this “order of battle” is to hand the founder a marker, have them go up to the whiteboard and diagram the players in the market and where they fit. (Try it.)

3. See through the eyes of customers and competitors

The third view is of the action as seen through the eyes of customers and competitors. Put yourself in your customers’ and competitors’ shoes in order to deduce possible competitors’ moves and anticipate customer needs.

  • In an existing market this is where you ask yourself, “If I were my own competitor and had its resources, what would my next move be?”
  • In looking through the eyes of a customer, the question might be, “Why should I buy from this company versus the incumbent.”
  • In a new or resegmented market, the questions might be “Why would more than a few early adopters use this app, web site or buy this product? How would I get my 90-year-old grandmother to understand and buy this product?”

Think of this technique as playing chess. You need to be looking at all the likely moves from both sides of the chessboard. What would we do if we were our competitors? How would we react? What would we be planning? After a while this type of role playing will become an integral part of everyone’s thinking and planning.

Putting it all together

First-hand knowledge is clearly the most detailed and essential data stream, but offers a narrow field of view. Founders who focus only on this information risk losing sight of the big picture.

“Bird’s-eye view” data provides perspective on the market but lacks critical detail. Founders who focus only on this image risk missing the “ground truth.”

Seeing through the eyes of customers and competitors is a theoretical exercise limited by the fact that you can never be sure what your customers and competitors are up to.

The combination of all three data streams helps founders form an accurate picture of what is going on in their business and help them hone in on product/market fit.

Even with information from all three views, founders need to remember there will never be enough information to make a perfect decision.

Building an Information Culture

The most important element of data gathering is what to do with the information once you collect it. Customer information dissemination is a cornerstone of Lean and agile companies. This information, whether good or bad, must not be guarded like some precious commodity. Large company cultures reward executives who hoard knowledge or suppress bad news. In any of my companies, that is a firing offense.

All news, but especially bad news, needs to be shared, dissected, understood, and acted upon.

This means that understanding poor click-through rates, retention numbers, and sales losses are more important than understanding sales wins; understanding why a competitor’s products are better is more important than rationalizing ways in which yours is still superior. Winning startups build a startup culture that rewards not punishes messengers of bad news.

Lessons Learned

  • There are 3 data streams that every founder needs: First-hand knowledge, “bird’s-eye view,” and the view from the eyes of customers and competitors.
  • Startups often fall into the trap of confusing metrics, testing, and surveys with real-life customer interaction.
  • The goal should be to build an information culture to help you get to product/market fit.

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Thinking About Thinking: Tiny Changes, Big Results

BY SHANE PARRISH

How is it we become better at thinking? How is is we learn to make better decisions? And if we can’t make better decisions how is it we learn to avoid stupidity.

A while back I came across an irreverent billionaire named Charlie Munger who taught me how to think better. I learned about behavioral biases but more than that I learned how the big ideas of the world can help you understand problems. I also learned that I needed to prepare to make good decisions in the first place.

When it comes to thinking too many of us focus on the way we think things should be and not enough on the way things are.

Here’s a sketch of the things that have helped me think a little bit better.

Principles

Three of the guiding principles that I follow on my path toward seeking wisdom are:

  1. Go to bed smarter than when you woke up; and
  2. I’m not smart enough to figure everything out myself, so I want to ‘Master the best of what other people have already figured out.’
  3. Ego should be toward the outcome and not toward me being right.

What Matters

Ok … so when it comes to getting better at thinking.

IQ tests don’t really matter. That’s not the type of knowledge or brainpower that makes you better at life, happier, or more successful. It’s a measure sure, but a useless one.

There is no get-smarter-quick plan. Acquiring wisdom, is hard work. (see My answer to What skill should I learn for 1–2 hours a day, that will help me become successful?).

If you want to learn to think better you focus on what you’re doing. I don’t mean spending putting a few 5 minute time chunks of time together to learn something new but focus on understanding the problem. You need to spend time thinking.

Mental Models Are The Key To Understanding

Mental models help you think better because mental models are how we think.

“Mental models are an explanation of how things work. They are how we decide what variables matter in a given situation and how those variables interact with one another. Mental models are how we make sense of the world. (source)”

Your head is already full of mental models of how the world works. What separates good thinkers from great thinkers is: (1) the number of models at their disposal; (2) the accuracy of those models; and (3) how quickly they update their model in the face of feedback.

1. The number of models

There is no one model that explains everything. All models are limited but that doesn’t mean they are not useful. The key is having the right model available when you need it.

If you have a toolbox full of accurate models it increases the odds that you will understand the problem. The extent to which you understand the problem is the extent to which your actions will be correct. The better you understand the problem, the better actions you will choose.

If you’re interested, I’ve listed 113 of the most important mental models , and provided a brief description of them. Some of the models represent how the world works (e.g., evolution, critical mass, Pyrrhic Victory) and some represent how to think (inversion, second-order thinking, the map is not the territory).

The key to the models is you have to apply them outside of the discipline to which you originally learned them. Compound interest, for example, doesn’t only apply to money. It’s a model that when combined with evolution explains to a large extent how we got here today.

2. The accuracy of those models

Models are great but not if they’re flawed. If you’re using a model that’s flawed you’ll misunderstand the variables that matter and the cause and effect relationship between variables. That means you’ll think something that’s not true and if you take action on those thoughts, you’ll likely end up with a big, time consuming, anxiety-ridden mess.

The best way to test the accuracy and robustness models is to let time filter them for you. Compound interest was working long before recorded human history.

3. Updating your models

When you’re wrong, you’re wrong. People might start out with more ability than you — while you can’t control the hand you’re dealt, or the vector your parents put you on. But if you’re an adult, at some point you have to take control of your own trajectory. I’ve seen people who quickly adapt to feedback from the world rise to incredible levels.

Typically the mental models we’re using get in the way making us unable to see their limitations or inaccuracy. Updating your models in the face of evidence or feedback is very hard. One thing that seems to work well for people is to refocus your ego from “you being right” to “the best outcome was achieved.” If you tie your ego to outcomes, you positively change the path you’re on.

Knowing the models is not enough. You have to use them.

You need to know how to apply your mental models to understand real problems.

Charlie Munger, the irreverent billionaire business partner of Warren Buffett, shows us how this is done using the model of autocatalysis.

Disney is an amazing example of autocatalysis … They had those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.

No one discipline has all the answers, only by looking at them all can we come to grow worldly wisdom.

Munger continues:

Have a full kit of tools … go through them in your mind checklist-style.. .you can never make any explanation that can be made in a more fundamental way in any other way than the most fundamental way.

This is the path; the rest is up to you.

StartUP FIU’s EcoAtlas Finalist for Fast Company World Changing Ideas 2018 Awards

Miami, FL  April 9, 2018 – Fast Company, a leading innovation and entrepreneurship publication, announced today that Studio Roberto Rovira, a Miami company founded by an FIU faculty member and creator of the EcoAtlas, is a finalist in this year’s World Changing Ideas 2018 award. As a finalist in the Photography and Visualization award category, Rovira’s EcoAtlas joins a prestigious group that in 2017 included winners IDEO, the world-renowned design firm, and the Nature Conservancy. The EcoAtlas is a comprehensive open source design and visualization platform that communicates vast amounts of information about the natural world through simple and engaging data maps.

The EcoAtlas is the creation of Roberto Rovira, Associate Professor and former chair of the Department of Landscape Architecture and + Environmental and Urban Design at Florida International University in the College of Communication, Architecture + The Arts (CARTA). “The issue of environmental sustainability is in many ways an information issue and the EcoAtlas brings alive the consequences of decisions like sea level rise on plants and animals in a visually compelling way,” states Rovira, “The EcoAtlas enables overwhelming amounts of data about complex natural patterns to be intuitively understandable.”

Trained as an engineer and landscape architect, Rovira was quite comfortable creating the design and functionality of the EcoAtlas, but when he thought about commercializing his product, he turned to StartUP FIU. Rovira was admitted into Cohort 4 of StartUP FIU’s Empower Accelerator, which started classes in January 2018.  The intensive 14-week program designed to help students, faculty and community members scale their idea, invention or company. Says Rovira, “It’s been an intensely rewarding experience that has provided multiple resources to build momentum for the successful launch and execution of my vision.”

Rovira is part of a new movement led by StartUP FIU to increase support for innovation and entrepreneurship at FIU. “It’s wonderful to see faculty in the Cohorts,” says Kate Sackman, Director of the Empower Accelerator, “They have such a wealth of information and domain expertise. We just need to demystify the entrepreneurial process to help them commercialize their ideas and research.”

Rovira agrees, “It is an honor to be recognized as a finalist by such a prestigious publication and awards program that values innovation aimed at addressing real world problems. My ambition has been to achieve maximum impact and global reach with the EcoAtlas. With support from StartUP FIU and now the Fast Companyrecognition, I can see a path towards achieving that goal.”

 

About the World Changing Ideas Awards

World Changing Ideas is one of Fast Company’s major annual awards programs and is focused on social good, seeking to elevate finished products and brave concepts that make the world better. A panel of judges from across sectors choose winners and finalists based on feasibility and the potential for impact. With a goal of awarding ingenuity and fostering innovation, Fast Company draws attention to ideas with great potential and helps them expand their reach to inspire more people to start work on solving the problems that affect us all.

 

About StartUP FIU

StartUP FIU is a university-wide initiative at Florida International University (FIU) to foster and develop innovation and entrepreneurship that pursues opportunities of The Fourth Industrial Revolution. These opportunities include the development of breakthrough technologies, the pursuit of enterprises that close social or environmental gaps and the creation of companies that can create meaningful jobs of the future. StartUP FIU is focused on developing traditional and social entrepreneurship among students, faculty and staff, alumni and the South Florida community, leveraging the university’s strengths to stimulate commercial investment and job growth in the process. For more information on StartUP FIU, visit startup.fiu.edu.

About EcoAtlas

EcoAtlas communicates the seasonal changes of the natural world and serves as a comprehensive design and visualization tool. It bridges art, science, design, and technology, and connects the power of data and technology to help designers, planners, and anyone interested in better understanding and transforming the environment. By using intuitive, graphic mappings that can convey changes in bloom times, deciduous tree patterns, produce seasonality, animal migrations, and other time-dependent phenomena, the Ecological Atlas facilitates a comprehensive understanding of the environment. For information, contact Roberto Rovira (rovirar@fiu.edu) Associate Professor, Department of Landscape Architecture and Environmental and Urban Design (LAEUD), College of Architecture and the Arts, Florida International University.