Bob Dorf: How to work on a startup

Bob Dorf is a well-known entrepreneur (he led 8 companies on IPO), a consultant and mentor to the Startup Academy, who began his career in business when he was 12 years old. Today he is a welcome participant in many conferences, because like no one else knows how to create successful startups correctly, get on their feet firmly and turn them into large companies.

Recently, Bob Dorf spoke at the Business of Software 2012 conference where he talked about the basic principles of a healthy startup life. To your attention the main points of his speech in which I sincerely believe and try to use every day:

Why do most startups fail?

• Most modern startups cannot be scaled, they fall apart due to the lack of a large number of loyal users and customers who are passionate about the product.
• Writing code is only half the job. Today, technology allows you to create almost everything that imagination is capable of, so the ability to determine the exact portrait of a potential customer, as well as find it in the mass and "fall in love" with your product comes first.
• If you are passionately passionate about your idea, then after 20,000 hours of hard work you will get 1 chance out of 8 for success. The only way.
• Each team needs 3 people: “hacker”, “businessman” and “creator”. Every morning, a “hacker" and a "businessman" should hold mini-meetings. After discussing key issues, the “hacker" should devote himself entirely to creating the product, and the "businessman" to finding the ideal client.
• Half a century ago, the success of the company depended on how the entrepreneur overcame obstacles, on the process. But times have changed.
• Most startups “die” because they think that:
  A) they know their customer
  B) they know their product
  
• The founders perceive everything as a linear process: "concept - prototype - testing - launch", and make a lot of mistakes.

A business plan is the enemy of startup # 1.

A business plan is related to the creation of creative texts, but not to the development of a real business.



Do not stop asking yourself: "What can I change to make the product better." Always try to get feedback from users and customers.

Test the business model! Any, even the most elegantly written, business plan will not stand up to criticism at the first meeting with a real client. The Webvan example is very instructive.

What is a startup for me? This is a gang of pirates who come together from time to time to combine pieces of a "map" and to understand whether they are moving in the right direction. Always in a search state. Only after a detailed analysis can you understand your “business plan”, based only on bare facts. There is no such “documentary” concept of “startup with an expectation of 8 years”, there are real “several years of ups and downs”.
A startup needs an action plan rather than a business plan. In this sense , Alexander Osterwalder’s “Canvas of Business Models” is ideal. It has 9 components (main blocks of questions), the most important of which are:

• Suggested Benefits - What Problem Are We Solving?
• Consumer segments - For whom do we solve it?
• Relations with customers - Where do we find them, how do we make them loyal and how do we increase their number?
• Revenue streams - What do we earn?

Consumer segments should be identified as clearly as possible. Successful relationships with customers are the constant fulfillment of their duties to them, justification of their expectations.

Create a business model with multiple partners. When you are finished, at the exit you will receive a product that meets the needs of the market. But your canvas is just 9 thoughtful assumptions! How to turn assumptions into facts? That's right: go to your potential customers and ask them! That is how competent relationships with customers are built.

Customer relationship

Relations with customers is the process of setting the criteria for an “ideal” customer, their justification and approval, product adaptation, customer search and, finally, building a company around their needs. The first three stages are the classic stage of the “search” in the process of company development. The turning point and key moment, as a rule, arises precisely at the stage of the “search”. The process of searching and building a company is already the stage of "action".

“Search” is a crucial step. How to properly implement our plans, you will be taught in any decent business school. And only in the search process you yourself must choose those of your assumptions, which, in your opinion, are correct.

Prototype / “pilot” sample

The entire search process begins with the creation of a prototype. Create a product with a minimum set of functions, a test sample for new ideas.

If you want users to start interacting with your product, create a “toy” for them as soon as possible! Even if it won’t work to the end: the reaction of users to the prototype is much more valuable than their reaction to your words about the imminent launch of an ideal product. After all, it is their feedback that is invaluable in improving the product itself!

A striking example of the value of creating a prototype is Diapers.com. The creators launched a website and began accepting orders for diapers even as long as they actually had them available. Entrepreneurs just wanted to check if their idea was worth further developing it. As a result, they spent a lot of time buying diapers all over the city and delivering them from other parts of the country. The number of orders grew, and the project already needed a truck to deliver orders. The founders lost money in the process, but they did not set themselves the goal of self-sufficiency. They just checked the selected business model. The benefits offered are what they took as a basis in the process of communicating with customers.

A decrease in sales is only a small price for the information that you receive during the testing process.

The prototype is your tool for initial communication with the client. The faster you create it, the faster you will receive answers to questions:

Is everything so bad?
What qualities allow our competitors to meet your needs?
What can make our product better?

A turning point

Pivot is the essence of a customer relationship. Pivot is an iteration between creating a portrait of a client and finding it. A U-turn is always swift, but it opens up new possibilities.

Change only if 20-40 of your customers say something is wrong. Do not pay attention to one-time complaints.

In case of any changes, return to the assessment of the business model, then return to your customers and find out if the situation has become better. The process of product adaptation cannot be postponed; it cannot be avoided. As the creator of the product, you MUST go through it!

Typically, changes in the product adaptation process in large companies result in the dismissal of employees. In a startup, this process is a “holiday" because it helps to modify the product, which will attract even more customers.

The main problem here is hasty solutions. Make sure you have collected enough feedback to make changes? 3 people said bad about your product, and are you in a hurry to change something? Take your time: find a dozen more similar opinions before making crucial decisions.

The faster you manage to change, the less money you lose: a pivot is a time bomb.

How to stop in time?

In fact, there is no endpoint in the process of creating a product, but you can always slow down modifications when you understand who your customer is and how he uses the product to meet his needs.

The canvas of a business model is your landmark, a map of your business and the road to your client.

Make sure that all your assumptions are tested on the client - it is the test runs that are the main ones in determining the degree of product readiness.

And remember: the most important customer is an enthusiastic customer, because he, like you and your investor, wants to bring your product to perfection.