Steve Blank’s Customer Development methodology is one of the critical teachings of entrepreneurship over the last twenty years This episode explains why great founders are more like artists than normal business people and why getting out of the building is more about artistry than running a focus group.
Steve Blank:
When they use your stuff, whether you've handed them a demo on the phone or whether you drew something on the whiteboard, does someone's pupils dilate?
Mike Maples:
That's Steve Blank, who's probably done more than any single person I know to change how entrepreneurship is taught and practiced throughout the world. This is Mike Maples Jr Floodgate and it's go time with Steve Blank.
Mike Maples:
A lot of great startup founders cite Steve Blank's work on customer development as the single most important thing they read to help them succeed. Steve's been involved in eight startups, including a few craters, but with E.piphany, he made it to the promised land. And he's also a polymath, having spent time in the military, academia, business, and even touching the edge of politics. I've enjoyed getting in trouble with Steve on numerous occasions, so I hope you enjoy our conversation.
Mike Maples:
Steve, thanks so much for coming.
Steve Blank:
Thanks for having me, Mike.
Mike Maples:
One of the questions I get all the time is how do I know whether I have product market fit? Like what key performance indicators should I have? And usually the questions are kind of rendered through the lens of metrics, but I think my experience is similar to yours in that it's more like noticing the aha value proposition that somebody is desperate for. So let's talk about that for just a little bit.
Steve Blank:
Yeah. And I don't want to dis metrics because I happened to be data-driven as a founder, but you got to remember the number of validation points you need in a million dollar enterprise sale is very different than the number of validation points you need for a mobile app.
Steve Blank:
So, you know, a mobile app, unless I got a couple hundred thousand users or a million, whatever the number is today, and great VCs like you and others will tell entrepreneurs what that is. It's very different from the enterprise space where you don't need hundreds of thousands, you maybe need three or 10 and for me the real metric though for both usability apps and for enterprises is someone's pupils dilate, when they use your stuff, whether you're handed them a demo on the phone or when you drew something on the whiteboard, did they go, "You're not leaving." That's why I'm like "Yeah."
Mike Maples:
It's almost like where have you been all by life?
Steve Blank:
Where have you been all my life? What you're looking for is not one. One is a great data point, but what you're looking for is a repeatable pattern of that.
Mike Maples:
Yeah.
Steve Blank:
And this is the what I call the finger tip feel. The art of being a founder is you got to know am I optimizing a local maximum or is there a global maximum here?
Mike Maples:
Yeah.
Steve Blank:
And you know what? It doesn't come with a memo, right?
Mike Maples:
Yeah.
Steve Blank:
So this is you as an entrepreneur. You should have a great advisory board, you should be able to bounce this off of your investors who like are just doing drive by most of the time but have seen more patterns than you have. As a great founder, don't miss that signal. And this is all about getting out of the building, right? There is no way, if you were just sitting around, you know, building product and shoving it out the door that you would ever watch those facial expressions, which is why customer discovery, this out of the building activity, is not email.
Steve Blank:
You could get that data and it, I don't mean it's not worth having, but until you could read someone's body language, if they're looking at their watch or tapping their foot or you know, looking at their calendar versus like they're like about to grab you by the collar and go, "Let's go do this." You know when that happens and if that doesn't happen, that's an equally valid signal that that's not product market fit and you need to be asking the why.
Mike Maples:
You know, I used to say that customers early on, the early evangelists, as you might call them, don't always buy just because they want your product, but they buy because they believe what you believe and it's like you're in on a secret together.
Steve Blank:
So way back when, I think it was Geoff Moore who articulated this probably after someone else did, but Moore was great at popularizing this. He basically said there are two types of reasons someone will adopt your stuff and now let's talk about the a B2B case.
Steve Blank:
One is they want a external competitive advantage, right? So they see what you've got and they go, Oh crud, you know, this'll give me whatever and more market share or more revenue or whatever. And the other is, and you've got to remember this, and as hard as an entrepreneur to think like this, in a corporation, it might give me a political advantage and for my career or you know, turf for something else. And the best is when it does both. And it gives me competitive advantage. And like, Holy cow, I can start a new division or whatever.
Steve Blank:
And so I tend to look for those, for a B to C product, something that a user has. There are two types of B to C products and it applies to B2B as well, at least the motto I use. One type of product does function. It's a better word processor, better calender or better at Slack or something else. The other category are things like video games or porn or entertainment. Those aren't features at all. They fulfill needs. And so you've got to figure out are you building something that adds features and functionality? Or are you building something that that solves emotional needs?
Steve Blank:
There's very rare products and very rare CEOs that managed to get the two to intersect and that was the difference between Steve Jobs and Bill Gates. Gates built products for functionality. Jobs built products that while functional actually created need in a way that very few tech products had. Right.
Steve Blank:
And if you think about it, that's like the sweetest spot ever and we should probably about what products actually fit like that, that you kind of want them and think about what Jobs did with the iPhone for a decade is he turned iPhones and Apple watches into what the automobile industry did in the 40s through the 60s is whether you needed one or not, there was a model change over every year and the perfectly functional device you had last year, you were ready to throw in the garbage because there was a new one even though it had new tail fins or it was painted blue or better camera, even though you didn't use that camera.
Steve Blank:
It was actually a model that was pioneered by the automotive industry and Apple figured out how to reinvent it again for a consumer device. It's hard to think of other devices like that, that had that intersection of both need and functionality. Does that make sense at all?
Mike Maples:
Oh yeah, and I guess what I wonder about Steve is you are basically the inventor of customer development and sort of which spawned the lean startup movement and a lot of the early examples in the four steps of the epiphany, people said, Oh, these are all B2B examples, but then a lot of great consumer companies came about by doing these techniques. Did you, over time, start to get a sense of how do you know you've got product market fit and a consumer play?
Steve Blank:
Yeah. You know the experiment we were running, even though the book was written based on my experience in B2B company called E.piphany, the experiment we were running was at Eric Reese's startup which was IMVU, which was a consumer company. Eric was the first one who actually when Eric adopted customer discovery, the total available market doubled from me to me and him.
Steve Blank:
And so, we got to see the same thing. I mean, you were just running the same types of experiments about adoption, building MVPs, and seeing what worked. And in that case, making sure you wired the product for data from day one. And Eric was a master at that as we were actually testing hypotheses but actually testing it not only on pupil dilation but on having real data in terms of cohorts and users and AB testing and the rest.
Mike Maples:
And what did you find was the equivalent of pupil dilation in consumer?
Steve Blank:
Well, in for IMVU's case, it was, you know, a whole series of did they download it, did they open it, you know, how much time did they spend on the app? Did they download new avatars? Do they download clothing and furniture? Did they buy any additional clothing and furniture? So you could test engagement all the way down through our pipeline and then as you make changes, you would actually measure each cohort. And it was actually a great set of activities and in watching customer discovery in the beginning of the lean startup actually run by a master who was there.
Mike Maples:
Yeah. And it's funny because once again, he didn't succeed by running surveys.
Steve Blank:
Right.
Mike Maples:
He didn't ask customers what kind of avatars they wanted, what kind of outfits they wanted. It was what they did, which communicated the fit rather than what they said.
Steve Blank:
So one of the things that have gotten lost in the midst of time at least was why I did customer discovery and this whole getting out of the building stuff, it's very easy to confuse customer discovery with a giant focus group. Let's go collect the sum of every possible customer need and let's go run in and beat up engineering and tell them, here's the list, we did discovery. See? This is what we need. That's the antithesis. That's, in fact, when I see my students doing that, I remind them I could still go back and change their grades.
Steve Blank:
Customer discovery and lean is all about informing the founder's vision. If you don't have a vision for what you want the world to look like when you're done, you're going to be whipsawed by every last person who talked to you.
Steve Blank:
There's a phrase called profound beliefs. If you can't go up to the whiteboard and telling me what you believe, what's the world look like today? What's it going to look like when you're done? What are you going to change and why will the world move in your direction? And therefore, discovery and lean is all about running tests to validate your hypothesis.
Steve Blank:
Now, the one thing I know what you don't is every one of your hypotheses are likely wrong on day one and you will be informed by those experiments and your vision will change over time, but it's going to change because you had profound beliefs as you get educated and because you have another great attribute of being an entrepreneur is you're agile. And the idea is to figure out which one of these things that people are asking for are actually the right direction.
Steve Blank:
So what you're looking for in addition to informing your vision is a founder is looking for signals and noise and there's a ton of noise, right? Everybody has an opinion. You're running AB tests. That data's all over the place.
Mike Maples:
You're getting advice from advisers.
Steve Blank:
You're getting advice, your VC's are like smacking you silly.
Mike Maples:
Yeah.
Steve Blank:
And in the old days, we used to worry about burning cash. Now you've got to step over the piles and when you come into your office, but in the old days we were burning cash and also worrying about running out of it. And so under that pressure, again, the the art of an entrepreneur, the art of a founder is informing my vision by getting out of the building and listening to people and then seeing are there any signals about, wait a minute, the real business is over here. Right.
Mike Maples:
Yeah.
Steve Blank:
I mean, maybe we not only need a pivot about channel or pricing or something else, maybe we need a restart.
Mike Maples:
Yeah.
Steve Blank:
And only the founder could do this. This is the other part like which was still really hard. I find a lot of founders going, Oh I've got this customer discovery stuff, my VP of sales is right on it. Right.
Mike Maples:
Yeah.
Steve Blank:
And that's when you go, you just failed.
Mike Maples:
Yeah. Yeah. Exactly.
Steve Blank:
The getting out of the building part, at least in the early stages of a company, can only be done by the founders who could change the company's product and business strategy and why? Because like if you send a proxy, like a VP of sales or VP of marketing out there, they'll gather some data and they'll come back to the founder and say, yeah, everybody thinks your idea sucks. And what you think the founder is going to say?
Mike Maples:
Well, when you're in zero to one mode, what great sales VP is going to want to work at your company. You've got no revenue, no customers, no momentum, hardly any money.
Steve Blank:
But even more so, a founder is going to say you're not selling it correctly. But if a founders out there and they hear continually, this sucks, a smart founder will go, well, what would solve the problem? Or what do you need? And because they're the founder, they could listen and say, Oh, we do that too. And I swear I've done that and drew something new on the whiteboard and they go, Oh, well if you were doing that, I'd buy that in a minute.
Mike Maples:
And you'd be like, well, why didn't you say that?
Steve Blank:
Why didn't you say that in the first place?
Mike Maples:
Yeah. Yeah.
Steve Blank:
Only the founder could do that and by the founder, I mean the founder, who has the authority to come back and talk to their co-founders and go we need a change in strategy and whatever. It's usually not in an employee. It's almost never an employee early on.
Steve Blank:
And so, this notion of getting out of the building is also coupled with you're trying to inform your vision, but the person who's being informed has to have the authority to make rapid changes.
Mike Maples:
I've heard you use the term artist a couple of times.
Steve Blank:
Absolutely.
Mike Maples:
And I've heard you talk about great entrepreneurs really are like artists.
Steve Blank:
Yes.
Mike Maples:
Let's talk about that a little bit.
Steve Blank:
So if you think about it, I teach entrepreneurship and in the second half of my career after you do you teach or after you can't do anymore, you teach. And one of my good friends, when I started teaching, a guy named John Rubinstein who was head of hardware engineering at Apple and ended up running Palm used to laugh. He said. Steve, you were born an entrepreneur. You can't teach this stuff. And I went, well, that's interesting cause I am.
Steve Blank:
And I started thinking about the nature of entrepreneurial education and the nature of founders themselves and the mistake we made in entrepreneurial education, I'll go back to your question in a second, is thinking that we were teaching like a job, like accounting or finance or whatever.
Steve Blank:
And I realized that that's the wrong analogy, is that the founders are closer to artists than any other profession. And what I mean by that is that artists see things that other people don't. They hear things that other people don't. You and I will look at a blank canvas and Van Gogh painted Starry Night, or you and I will look at a blank score and Beethoven who was deaf just gave us the ninth symphony.
Steve Blank:
And what's really interesting is that's what founders do. Back to education is that, you know, 500 years ago during the Renaissance, we discovered how to teach artists. You teach them theory. Back then, if you're a painter, we taught you perspective and color and whatever. But then it was a whole heck of apprenticeship and practice and hands on. And in the early days of apprenticeship you couldn't tell who was Michelangelo and who should be asking two coats or three on the wall.
Steve Blank:
But after a while, they came into their own. And I think the same is true for entrepreneurs. There are some that are spectacular artists and there are some that are just good execution people and some will grow into great artists. You know, I was an apprentice for I'd say a decade or so, and then all of a sudden I learned, I actually had some of those skills that the people I was apprenticing from and eventually, you know, it was my turn to do them.
Mike Maples:
So one of the things that I love about the term entrepreneurs as an artist as well as artists have like a sensitivity, right? They have a sensitivity about how they perceive the world, but also they have a way of grabbing you in a different way, if they do their job.
Steve Blank:
Artists are crazy people, right?
Mike Maples:
Yeah.
Steve Blank:
I mean, artists, when we think about musicians or painters or whatever, they do not live normal lives. Art is not a job. It's a calling. You're called to be an artist. You hear a voice, particularly when you're young, saying you can't imagine doing anything at any price other than painting or writing or music. I couldn't imagine driving down highway 101 in the middle of Silicon Valley. I couldn't believe I was getting paid to go do this. And I would sometimes I'd actually be calculating how much could I afford to pay them to keep me in this company?
Steve Blank:
If that's not the feeling, then you're a mercenary, and it doesn't mean mercenaries can't make money. But the Valley was built on artists as entrepreneurs and entrepreneurs as artists who were driven by a passion of creating something that never existed before.
Mike Maples:
And a lot of your examples of getting out of the building or when the guy takes the marker from you, or when you say, Hey, we thought it was this way, but now it's that way and the founder makes that distinction. It's a different form of sensitivity. It's about noticing. Right?
Steve Blank:
Yeah.
Mike Maples:
And noticing is one of my favorite verbs when it comes to zero to one because most people think it's about selling, but it's really about noticing.
Steve Blank:
So that was the biggest, toughest thing for me when we started this whole customer discovery lean thing was that I used to have a, you know, a slide deck for VC did pitch and here it was and you know I'd raised some money and I would take that same deck after I raised whatever amount it was and instead of the last slide saying, give me $10 million, I would just simply change the last slide that said, give me an order and I immediately run out and start using that same pitch deck in front of customers.
Mike Maples:
Yeah. Bad decision.
Steve Blank:
Well, in hindsight, it was a bad decision, but we had no other model.
Mike Maples:
Yeah.
Steve Blank:
And what I had to train myself is leave the goddamn slides at home, leave it at home and try to deconstruct what were the hypotheses behind that deck that you actually just pitched to somebody who gave you some money or something. What are the fundamental assumptions behind that? Great. Let's see who else believes that, that actually could be a potential customer and the wrong way to do it is go give them a pitch deck. The right way to do it is to try to deeply understand the problem you think they have and whether the solution you're thinking about, whether it's to fulfill a need or to fill up the product spec, actually solves that problem or need, and that is what discovery is about in the beginning.
Mike Maples:
The other thing that I wanted to double click on for a second was earlier you talked about, I think you called it the profound beliefs.
Steve Blank:
Yes.
Mike Maples:
The part of that that really resonates with me is when founders I work with want to raise their series A. Oftentimes it's like the first mistake is five slides in, we still don't know what the company does. The other thing though that I encourage people to do is to say, first off, what do we do? And then second off, what is the set of things that we believe? Sometimes it's powerful to go to an investor or a customer and say, look, if you don't believe this thing right here, none of the rest of it will make sense.
Steve Blank:
I completely agree, Mike.
Mike Maples:
Yeah.
Steve Blank:
And it's in fact, you know, you could articulate that for as an entrepreneur is here's what the world looks like today and here's what we believe the world's going to look like in three years, five years and whatever. When everybody believes what we have is buying or using or you know, renting apartments from us, or using our cars to instead of taxis or you know, or reusing spacecraft or whatever and people go, "What?"
Steve Blank:
And if you can't capture a VC's imagination with that big idea, then all the data you have is going to be irrelevant because you haven't kind of gotten into sync of them believing that that transformation is valuable because then you need to tie it to, and let me explain to you at least how we're going to make money ultimately and when that transformation happens.
Mike Maples:
And so what were your successes and what were your craters?
Steve Blank:
I think in 20 years I only had three weeks of bad days. The rest of this, even when they were craters and I had four craters, actually I had two creators and creators are what? Let me talk about the creators first because that's what actually started this whole lean stuff was massive failure, at least massive for the time.
Steve Blank:
You know, my career was essentially selling tech to other technologists, whether they were semiconductors or super computers, and then I took a right turn into consumer products, into video games.
Mike Maples:
Rocket Science.
Steve Blank:
Rocket Science Games, which is luckily we've lost in the midst of time that most of your listeners, but I was on the cover of something called Wired magazine. I don't know if we still cut down trees and put ink on them, but it was a Silicon Valley's digital supergroup and there I was with a baseball cap and ponytail and we were as wrong as you could get a startup and make a very long, painful story short, I lost 35 million bucks.
Steve Blank:
In fact, 90 days after that article came out, I realized that we didn't understand our customers because of one thing, which by the way is a red flag to every founder. I discovered our customers obviously weren't technologist, but they were 14 year old boys who wanted to kill stuff and I hated my customers and therefore I didn't talk to them and therefore I really lost touch of what it is they wanted in game play and game, whatever because I didn't like them.
Steve Blank:
If you're not excited about getting out of the building, if that's not really interesting you as if it's a founder, you ought to give the money back because you will shut yourself off emotionally and find all these excuses about why you're too busy to go do this. And by the way, in hindsight, that's actually what ... that was what killed the company. I had lots of excuses. It was my co-founders responsible. Yeah, yeah, yeah, yeah. But at the end of the day, I truly didn't like my customers.
Steve Blank:
So anyway, we're going out of business and I had raised $35 million from some VCs we knew together and I had to call my mother and tell her. And my mom was a Russian immigrant. English wasn't their first language. And so everything I said she had to translate in her head. And I said, mom, I lost $35 million. And obviously there was like a pause. And she said, Oh, where'd you put it? And I said, no, it's gone, I lost it. And so like, you know, and then like she broke into multiple languages I didn't even know. She said, you know, the country we came from is gone, there's nowhere else for us to go. And then she thought some more, which I thought was pretty cool. She said, and her name is blank, you can't even change it. And you know, and I said, no, I'm calling you because the people gave me that money. Now they want to give me another $12 million to do my next one. And she said, only in America are the streets paved with gold.
Steve Blank:
And of course, a punchline to that was in the next one, that's where I actually applied the principles of customer discovery and sort of thinking about the nature of like getting out of the building and talk to customers and return to billion dollars each to my two investors.
Steve Blank:
That low point though was like, those were the three weeks in the 20 years where I was coming home and going to bed at 4:00 PM and when my wife was saying, perhaps you're depressed. I went, no, no, no, everything's just fine. But out of that I went through kind of a whole set of, you know, denial and then pissed off in my co-founders, it was all their fault and you know, like who else can I blame?
Mike Maples:
All the egocentric nonsense.
Steve Blank:
All the ego stuff, you know, and then like some acceptance and then ownership. But I think the real thing for me that came out of that was past ownership. Yeah. I was CEO. Yeah, here are the things I should have done, was what were the eristics that I should have learned from that stuff. And as I said, a customer discovery came out of going, wait a minute, if I were closer to the customer, so if I actually realized that this was an integral part of a founding CEO's job, this wouldn't have been a surprise. We could either shut the thing down or like change direction or you know, reformat the company or whatever. But I was like, you know, along for the ride. I thought, Oh, someone else is doing the game design and I'm in charge of finance and marketing and whatever. I'm doing a good job.
Steve Blank:
And no, not really. That was probably the biggest learning from failure. And I think what the entrepreneurial community got out of that is lean was born out of the, literally, a Phoenix out of the ashes of the failure rocket science.
Steve Blank:
And my next company, we nailed every piece of the things that I had gotten wrong in the last one, which turned out to be our greatest success because it was an engineered company. It was done with a set of co-founders who my engineering co-founder and I kind of did customer discovery together in a way that is probably a case study on how it should have worked and built a company that had an $8 billion market cap, which back then was like a lot of money.
Mike Maples:
So Steve, with Epiphany then, there's something I wanted to ask you about because I want to make sure I understand it right myself. It sounds to me like Rocket Science didn't fail because you weren't a good enough artist yet. It failed because you didn't combine the art and science and that in Epiphany, there's the art of just noticing and things that only a founder can do, but is it fair to say that customer development on some level is applying the scientific method to avoiding avoidable mistakes but also focusing your time and your energy?
Steve Blank:
Yeah, Mike. That's a good point. You could think about what we call product market fit, which remember you can only do product market fit if you're getting out of the building or else you're just throwing stuff against the wall.
Mike Maples:
Yeah. Or just praying for a miracle.
Steve Blank:
Right. That was Rocket Science. And Epiphany, you know, product market fit really is evidence based entrepreneurship. That's how you get product market fit and you don't get evidence until you've run a lot of experiments.
Mike Maples:
Yeah.
Steve Blank:
And you don't get to look at experiments until like you're out, like running them in front of like real customers. That was the beginning of this evidence-based, get out of the buildings, start doing MVPs, doing AB testing, etcetera.
Mike Maples:
But what strikes me about Epiphany versus say Rocket Science, one of my favorite metaphors for zero to one is this character Joe Colombo and Joe Colombo detective and he's that guy in the trench coat who goes around. Too many situations I see, the founding team goes and pitches a bunch of customers and they want to be validated. They're looking to get validation for what they're doing. Where I've seen it work before is when it's the love of the game of finding the clues and you'll solve the riddle, but you just love the whole process of finding the clues.
Steve Blank:
So originally, when we started customer discovery, Mike, and this to your point, there were four steps to this. And the first, the part of going out and pitching your product, that's the second step. That's validation. The first step really is discovery and discovery to me actually meant you need to discover whether your assumptions about the customer problem you're solving or the customer need you're fulfilling are correct. That has nothing to do about your product on day one.
Steve Blank:
And sometimes, you will literally need to play 20 questions with the founder. Well, yes, I know you're building X or Y and I know this is your vision, but what problem is it? And once you kind of get that, then you can understand as a founder, if you go outside the building, you'll discover there's some people who have problems, but they don't even know they have problems. You know what, that's not an early customer. There's some people have problems and they know they have problems. Well, at least I could take a meeting and learn about their problems. But until you get to the next step, they have a problem, know they have a problem and they've been actively looking for a solution.
Steve Blank:
Now, this is an interesting conversation. It's like why are you looking and how important is it and whatever. But if they haven't tried to assemble a solution themselves out of piece parts or competitive stuff or whatever, they're still not ready yet. And so what you really want to find that someone's actually clued something together and you will think, well they've got a solution. No, no, no, no. We're in here with a packet. So now that dialogue is really interesting.
Steve Blank:
And then finally, if you find somebody with all of that and they have or can acquire a budget, those are going to be your early customers. And the conversations would always go around, first times you would do this, you would learn about the problem and validate it, etcetera. And then the next types of meetings you would have is like, well, have you ever consider it that, you know, if someone gave you a solution that looked like this and this, it's not a product spec, it's just kind of a... Oh, that would be wonderful. Well, would you like a demo?
Steve Blank:
Now all of a sudden you've gone from problem to, yes, I'm interested to a solution to holy cow rather than here, what do you think? Huh? Do you like the slides? Huh? Yeah, you want to buy? That's a very different set of conversations. Does that make sense?
Mike Maples:
Yeah.
Steve Blank:
And so the first part I talked about is discovery. And for founders, this is the most painful thing in the world because you're so driven and you think you know the answer. You skip all that problem validation step and want to go into sales mode. It is the nature of a world-class founder.
Steve Blank:
And I have found it just screws you up because most of those assumptions you have on day one are mostly wrong, right? And if you don't get into listening mode, you try to get into sales mode way too early and then you make a worst by thinking, well, we need a VP of sales to actually start selling my hypothesis so here's the slides, let's go, and whatever.
Steve Blank:
And now you've got a proxy who all they could do is sell. They have no authority to change or even give you feedback that you're wrong because you've already decided that this is the price list and the product. Does that mean?
Mike Maples:
Yeah, and it feels like when you get into sell mode, you start worrying too soon about what's their budget, who's the decision maker, when are they going to buy something? Whereas that's different from say persuasion, where you say, here's what a better world could look like, and you shift the focus of their energy to what that could be.
Steve Blank:
So I'll give you an example in discovering, Mike.
Mike Maples:
Yeah.
Steve Blank:
So as you're trying to understand problem and solution, you could be asking, what it seems to them, to throw out a random question. By the way, how do you buy this stuff? Oh, I buy through channel X. And then I would sometimes ask other random questions. Who's the best salesperson you ever bought stuff from? Oh, Joe. Joe. You know why I'm asking that question? I'm building a list of the sales people I'm not going to hire that people have told me the best salesman.
Steve Blank:
Hey, how do you hear about new products in this area? If you're figuring out how do I spend my marketing money, what website? Who is the most influential bloggers or who's the most whatever. That is as you're doing discovery and you think you're just doing problem solution fit and product market fit, I'm learning about my channel, I'm learning about demand creation, I'm learning about, you know, all the other components are about, you know, how important is quality, you know, how many ... what sounds to a single data point is a random set of questions. I'm playing chess here across a whole space of things I need to discover and by the time I kind of reassemble that data set, I know exactly how I'm spending my dollars and I'm pretty sure I'm going to be on target when I find product market fit.
Mike Maples: A
nd this is part of the artistry, right? You go in with a set of questions to validate or invalidate a hypothesis, the scientific side, but like while you're in there, in the flow, you start to notice things and you ask questions.
Steve Blank:
It's you notice like what kind of coffee cups do they have on their desk from this logo. You know, you'll look at their like, did they have any certificates from some organization or whatever you don't even know about. You want to know what's on their desk. If they're reading magazines or journals or something else and is it B2B?
Steve Blank:
For if it's just, you know, if you're selling apps, what else is on their phone? How do they spend their time during the day on the phone? If it's entertainment, what else did they play? Most people don't have spare time. So what are you displacing?
Steve Blank:
If you don't understand that, those are the things you need to understand, you get bit in the rear much later on.
Mike Maples:
And if you're thinking in sell mode, you go to the meeting thinking I've got to convince them of X and your filters aren't calibrated adequately to sort of noticing the things that'll be the critical insights.
Steve Blank:
Right.
Mike Maples:
You know, Epiphany, it kind of all came together. But you know, one of the things that I think is under appreciated about startups is the near death experiences. I haven't been involved with any startup that didn't have near death experiences even when it worked, even when it got to the promised land. So did you have any at Epiphany?
Steve Blank:
About once an hour. I mean, no. Epiphany was a great bubble story in the, you know, the last internet bubble at the turn of the century. But we did actually go from zero to 125 million bucks in three and a half years of real revenue.
Steve Blank:
But in the early days, you know, we were competing with large corporations and other startups and I still remember we were selling to, I think it was [inaudible 00:31:48] and I had a great early VP of sales, Joe DeNucci, his friend was the CFO and we had a good in in the company and thought we had an order, you know, about the clothes for a couple hundred grand and discover that group in IT, like it was anybody but us because thought over their dead body, if they bought us, we were package system, all the work they were doing, they'd be out of jobs and they were wrong, but they would get to do better jobs, but they had decided that they were going to go select some other vendor.
Steve Blank:
And I realized the CEO of the company, it was okay if I lost to IBM or Oracle, but to lose to another startup, it wouldn't have financially put us out of business but it would have been morale crushing at this early stage because our engineers had worked really hard because this was a lighthouse customer, that is a brand name, that it turns out some early customers tend to leverage others as you're on that path for product market fit.
Steve Blank:
I realized we couldn't afford a loss on the board and so what I told Joe is call the CFO at home and leave a message that says we're withdrawing from the account. And I realized that if I could tell my engineers we pulled out rather than lost, it would have been a neutral rather than, you know, yeah, we wasted time but we didn't lose the account and I figured I had a 60% to 80% chance that things would go my way because what I told Joe to say is tell the CFO that like, you know, their IT people, like have this engineered for someone else to win. In six months he's going to be calling us back because it isn't going to solve the problem they have internally but good luck and we're just not going to play anymore.
Steve Blank:
And what I thought would happen happened. The CFO called Joe back literally at like 10:00 or 11:00 at night and said come on back in the morning and your PO will be waiting for you and he course corrected the IT organization to make the right decision.
Mike Maples:
Did Joe try to talk you out of doing that?
Steve Blank:
Oh, absolutely. Joe went ...
Mike Maples:
Yeah.
Steve Blank:
He's like no, no. You don't understand sales and ...
Mike Maples:
It's kind of like Maverick. I'm going to put on the brakes.
Steve Blank:
Oh, no. No. You know what? Oh no. And a great sales VP never wants to give up.
Mike Maples:
Joe was like Goose.
Steve Blank:
Joe and, yeah. Joe will tell you the same story. No, I wanted to go make ... and DeNucci was great. I mean, he was a great early stage, exactly the guy you wanted when it was a street fight in the early stages. But I realized that I had a bigger issue than Joe, which was the morale of my engineering organization and there was no way I wanted engineering to think we lost to another shitty start up.
Steve Blank:
It was just...
Mike Maples:
Well, the other thing that strikes me about your example, and I don't know if it occurred to you at the time or ever has, but like on some level you were guarding the first principles of your advantage in that call, right? You're kind of saying to the decision maker, apparently you don't value our advantage and if you don't value our advantage, we're just not a fit. There's probably going to be people throughout the world listening to this somewhat due to the fact that customer development lean startup ideas got exported to entrepreneurs throughout the world, what would you say to a founder who's listening who wants to build something truly great, right? Who's decided they're going to build a great product, a great company? There's no plan B. The excellence is just where it's at.
Steve Blank:
One of the things we never talk about in the, at least on the founder side and VCs, to be honest, couldn't give a crap, is about your personal life and the sacrifices you make.
Steve Blank:
You know, start ups cost me a marriage and they cost me a marriage because I didn't understand that my interests and my wife's interests were not aligned and luckily we didn't have kids at the time and luckily my current wife was also an entrepreneur and understood what it was going to take and had signed on for that.
Steve Blank:
The life of an artist, whether it's a physical artist or an entrepreneur, as an artist, as a career is a very painful career and most entrepreneurs fail. Unlike the movies,
Mike Maples:
Just like most artists fail.
Steve Blank:
Just like most artists and just to like, you know, all the stuff you read about Facebook and Twitter and whatnot, that's not, odds are, a lot of odds are that's not going to be you.
Steve Blank:
And so you better be thinking about are you doing this for the joy of doing this and is your partner signed up for that artist's career? And if not, don't do this. It ought to be done for the joy of creation of something. Not because you think you're going to be a rich and famous artist.
Steve Blank:
And yeah, you could figure out how to balance some of this stuff and I did, but it was hard and it was incredibly hard to kind of raise a couple of kids in the middle of doing a series of startups and my kids are now old and I have to tell you, you know, don't get your report card until they leave and it's where they want to spend the holidays is like kind of the result. And I learned that much later in life because luckily I had kids later in life.
Steve Blank:
Some of my role models, I watched them beat geniuses at work and have feet of clay at home, meaning their kids hated them. And that was a real lesson for me, is that I didn't want to have that happen. My kids were my most important product and having that perspective, I'm not sure I would've had that, having kids in my twenties. I was lucky enough to have a little more perspective to say, you know what? Creating stuff is great, but if I'm going to have a family, I need to figure out how to do both.
Steve Blank:
So it might not be the answer you want, but I think the lesson for all entrepreneurs is don't do this. If this is not your passion, it's not a job. There are great jobs out there and you could be a great technologist working for great salary and doing stuff in a great company and that's what you should consider. But if you're willing to bet it all and if you're willing to kind of do it, I have to tell you, I couldn't imagine doing anything more exciting in my life than the career I had. And if you asked me would I do it over? In a second. In a second.
Mike Maples:
And is there an element to this, Steve, where I used to say that when you're at a startup, if you love it, you work so hard that it hurts. And it's not that it hurts you, it's like, you're like, okay, now it's 7:00 PM. Do I go home now? And it's like, if, because if I don't go home now, I'm crowding out the rest of my life.
Steve Blank:
Right. So I gave the kind of the downside of like being an entrepreneur, but the upside, the upside, Mike is I have never had a moment of coulda shoulda woulda.
Mike Maples:
yeah.
Steve Blank:
I've done everything I wanted to do. I could look back and go wanted to do X. I did X. Wanted to do Y. I did Y. You now, wanted to start something and change the nature of entrepreneurial education or change the semiconductor business or change whatever. I took a run at that and some of them worked and some of them didn't and whatever.
Steve Blank:
But again, you know, I understood the cost of doing that and try to figure out how to do it right. So.
Mike Maples:
Yeah. Most of the great founders I've seen would have felt worse not knowing what would have happened then they would have felt if they'd failed.
Steve Blank:
Right. So if you're going to have a coulda, shoulda, woulda, and that's gnawing at you, then take a shot at it.
Mike Maples:
Well, thanks for taking the time, Steve. I really appreciate it.
Steve Blank:
I hope this was interesting, Mike.
Mike Maples:
I think it will be.
Steve Blank:
All right. Thanks.