Bob Dorf gave us some insight on what it takes to operate at startup speed and why most startups don’t get to say the three magic words every startup owner dreams of: repeatable, scalable, and profitable.
To kick off, could you give us a brief overview of your career as a speaker and author?
Well, to become a speaker and author, I first had to become an entrepreneur. And the first step in becoming an entrepreneur is learning the ins and outs of your subject. You don’t learn about startups in the classroom—you learn by launching or being part of one. So, when I was 22, I quit a wonderful, lucrative job to start my first of seven businesses. I then went on to spend just about 30 years building businesses. Some of them were highly successful, others moderately so, and others still were total colossal failures—the ones where I learned the most. When you’re forced to shut down a business, that’s when you really think about how to go about building a business the right way.
Steve Blank, who is notorious in the startup world as the founder of the lean startup movement, was a client for one of the businesses I co-founded—my biggest, actually, with more than 400 employees worldwide. Eight or ten years after Steve’s IPO and my second (failed) retirement, he reached out to me and said, “I need to write another book about startups. I wrote one before; I can’t do this alone again. And nobody’s better equipped to help me do this than you. You’ve got to be my partner and help me write this book.” So, we sat down and began a two-year journey to map out all of those trillion steps involved in taking a business idea and turning it into a repeatable, scalable, profitable business.
That effort led to a wonderful, exciting chapter for me as a trainer of startups, and particularly the trainers who train them. To date, the book, The Startup Owner’s Manual, has sold about half a million copies in 23 languages around the world, and has also led to all kinds of coaching, speaking, and consulting opportunities with my favorite kind of businesses—early-stage startups. I’ve been coaching for just under a decade, and reportedly I’m one of the three or four most knowledgeable and experienced people in the lean startup world, which itself is barely ten years old at this point.
They forget that businessess succeed not because someone has a brilliant idea, but because they solve serious, thorny, preiously unsolvable problems for people.
Having seen so much of the lean startup world, what would you say is the most common mistake made by lean startups?
In essence, people fall in love with their idea far too quickly.
The lean startup movement has developed its own sort of lexicon of buzzwords: pivots, MVPs, customer discovery, and all more jargon. Everybody wants to mouth the words, so they sound like they’re doing a lean startup, but they don’t want to actually put in the work to truly do it. Far too many startups get caught up in all the jargon and mantras that are part of the buzz surrounding the lean startup method, and they just go straight to work on their idea because they are so sure it’s going to be great. They forget that businesses succeed not because someone has a brilliant idea, but because they solve serious, thorny, previously unsolvable problems for people. But most startups start with the product, not the customer, which is the core strength of the Customer Development or Lean Startup method.
To me, this is problem number one, and I see it in probably 30 to 40 percent of the five or six hundred startups I sit across the table from over the course of a year.
One of our previous contributors, Larry Wu, discussed the idea that entrepreneurship is generally wasted on the young. He said that your typical startup CEO is more likely to be somebody in their mid-40s as opposed to the popularized image of a young guy in a hoodie like Mark Zuckerberg. What’s your take on on that? How important of a factor do you think a founder’s age and experience are when launching a startup?
Larry Wu is a smart guy, and he has put his finger on a real issue, which is that people have a tendency to get fixated on the images of Mark Zuckerberg with Facebook, or Sergey Brin and Larry Page with Google, who started these companies at tender young ages—probably before they even started shaving.
At one unusual and unusually successful incubator I’m quite familiar with in New York City, the average age of startup founders is about 45. These are either entrepreneurs on their second or third outing, or subject matter experts who have worked for some big bank or big company for their whole career, and know the industry they’re operating in. They know the problem. They see the pain it causes in that industry. They’ve conceived a solution to that problem, and the success rate among these older, more seasoned, knowledgeable people is much higher.
When I meet a young, enthusiastic millennial who wants to join the startup revolution, I tell them that the best education they could possibly get is to go work at a startup for a year or two—maybe even longer—and gain an understanding of how startups work, how they make decisions, how they process information. This allows them to also get a feel of the speed and uncertainty startups operate in. When you’re 23, 24, 25, you haven’t really experienced those things—you have very little meaningful business experience to lean on, if any. You have no gravitas or worldliness to lean on, almost by definition, and you have this very naïve, rose-colored-glasses view of the world. That makes it very hard to run a business, especially to start one from the ground up.
The prize is to operate at startup speed basically as long as you can stay awake essentially everyday.
How do generational mindsets such as those of millennials fit into the greater realities of startup culture? What kinds of limitations do young people run into as startup founders, especially when they are fresh and have little experience in building businesses?
Well, the startup world itself is over-hyped. The success rate is also over-hyped and often eclipsed by the occasional unicorn that flies by and gets everybody excited and thinking, “If they can do it, so can I!” I think this is what ends up leading us to the mistake I mentioned earlier, which is that the idea itself is only a small contributor to the horsepower or success potential of your startup.
I think sadly for too many people, the buzz around startups has made it like the lottery ticket for 25-year-olds: “You don’t have to be a Starbucks barista. You can start a startup!” Well, yes, you can—but they tend to overlook the crushing follow-up to that, which is: “Two of roughly a thousand of you will be very wealthy (someday).” Leaving the other 998 to ask, grande or venti?
There’s also this common associated issue in the presumption of success. Many younger and inexperienced startup founders take on this almost entitled mindset, that sounds like: “Well, I’m taking the risk. After all, I could be making lattes at Starbucks, but instead, I’m here doing this startup thing, so by default, success and riches and all the rewards that come with entrepreneurial risk should just naturally come to me.” In reality, what comes with entrepreneurial risk is also a massive entrepreneurial burden to work your butt off and keep trying things. When those things don’t work, you try other things.
You have to be relentless in “the pursuit of the prize,” as Steve Blank always calls it. The prize is to operate at startup speed basically as long as you can stay awake essentially every day. Sure, you can probably take Christmas Eve and Christmas Day off, and maybe even sneak out for New Years’ Eve. But, if you’re not back to work January first, or at the latest January second, you’re already a designated slacker in the pursuit for the prize.
That “presumption of success” mindset also affects work ethic, and leads to many young people getting very frustrated in their first six months, or to not working as hard in the second month as they did in the first because, “Well gee, magic didn’t happen, so why should I work so hard?”
I still remember my first day leading a training program in Moscow. I’m about an hour into giving my introductory lecture in a four-day program, and this big, burly guy stands up and says, “Professor, I’m Igor. I’m an honors engineering graduate from Moscow State University. I know what the customer wants. I will build it and they will buy it.” I said, “Igor, you shouldn’t waste your time here with me today—if you’ve got the magic formula, good for you.”
If you’ve got the lottery ticket, bless you, and enjoy it. But the “magic formula” happens maybe five times for every million startups. Steve Blank always says that entrepreneurship is a full contact sport. If you, as an entrepreneur, think you’re going to start a business to better manage your schedule and have more free time to go to the movies, be with your friends, play soccer or volleyball or whatever, you are absolutely A) dead wrong; and B) overwhelmingly likely to fail. There are so many startups competing for customers, and so many messages competing for customer attention that you can’t commit part-way.
It takes drive, passion, and a real vengeance to get a startup to those three magic words every startup owner dreams of: repeatable (“I do it in Chicago; it works in Oshkosh and Boston.”); scalable (“I can make more money over time by selling more products in more variations to more people and in more geographies.”); and profitable—which is the most elusive of the three.
Then, to set yourself apart, figure out how your startup will solve those problems in a way that is better, faster, cheaper, or smarter than anybody else. What is the problem we’re solving? Why is it so difficult to solve? How are people solving it today, as opposed to how we’re going to solve it?
How can lean startups avoid the mistake of “falling in love too quickly” with their idea? Are there ways startups can ensure they don’t fall into a trap of putting pressure on developing a “great idea” only learn the hard way that it alienates their potential or target customers?
Everyone is in a race for success and revenue. But first, survey the space you’re playing in and get a feel for it. Once you know what you’re dealing with, you can identify three or four blockbuster problems that people confront and are specific to that industry. Then, to set yourself apart, figure out how your startup will solve those problems in a way that is better, faster, cheaper, or smarter than anybody else. What is the problem we’re solving? Why is it so difficult to solve? How are people solving it today, as opposed to how we’re going to solve it? What kinds of improvements—be it in terms of life, business, time, or financial—are we going to deliver in ways that will create value that our future potential customers will be willing to pay us for?
Hiding somewhere in there is the design of your business, and the value proposition that customers are hopefully going to recognize. That should help to focus the business, long before you start designing or building the product. In any case, you should be thinking about not what you want to build, but what your customers want you to build—and are willing to pay for.
And that’s really the heart of the lean startup method—taking the time and dedication needed to really fair out the problem and optimize the business around alleviating or solving the greatest possible pain and suffering. When a problem is high-frequency; has proven difficult to solve; costs a lot of time, money, or blood and sweat; and is frequent, recurring, and painful—that’s where the business opportunities lie.
In The Startup Owner’s Manual, we say the first time you get out of the building to start talking to customers, talk to 50. Why 50, and not 300 or 10? Well, 300 is unfathomable. But with 10, you won’t get enough of a range of responses to gain any valuable insights or reach solid conclusions.
You’re not looking for percentage votes like you’d look for scores in a presidential opinion poll, for example. You’re looking for trend lines and clusters of feedback. For example, if you talk to 50 people, and 12 are big executives who say they want certain features, but then you also talk to lower-level data entry people, and they tell you they don’t care about those features but want other features instead, that gives you some insight and direction to work with. Then you have to decide, which way do we go? Do we maybe need two versions?
If you only talk to a small group of people, you don’t get that kind of clustering in the data of your research findings. So, you wind up asking simplified questions, the worst of which is, “Do you like it?” “I like it” is the most meaningless, unhelpful answer a customer could give you. Your goal is to get as much feedback as richly as you can from each interview. So, if you ask, “Hey Bob, would you give me $20 for this if I had one in my pocket to sell to you right now?” you’ll get a lot more meaningful feedback, especially when Bob says no. You can probe further and ask why not, and you’ll get an answer like “Well, I didn’t think it was very good,” or “I don’t really believe that your product can do what you say.” Then you know what your next steps are.
Too many startups take the opinion that if 20 out of 25 people they talk to say they either like the idea or don’t hate it, or that maybe they’d buy the product someday, that means they can check that box and move on to engineering or tooling. But that doesn’t really equate to any feedback of consequential value. So, the result is you have no valid feedback, you just have things to relay to investors: “We showed it to 25 people, 20 liked it.” “Oh, okay, we’ll give you money now.” (It doesn’t work like that.)
And that’s really the heart of the lean startup method—taking the time and dedication needed to really fair out the problem and optimize the business around alleviating or solving the greatest possible pain and suffering.
Every year at tradeshows we see loads of new emerging companies showcasing similar products, usually “new” technologies that are really just the same as the next guy. This has an effect of creating oversaturated markets, like we’ve seen more recently with home security and other smart home devices. What’s your take on that? Is it better or worse that these startups are competing in such a small space?
It’s horrible, and it happens again and again and again. At the end of the day, this isn’t really the startup business—it’s the fashion business. Three years ago today, there was virtually not a single venture-backed scooter company. Now there’s 15 of them. We had the horrible .edu “fashion” trend, where literally hundreds of digital education companies were going to put laptops in classrooms and train kids better than live flesh-based teachers could train them, and on and on and on. There are very, very few successes now in the seventh or eighth years of the .edu trend.
In this kind of setup, each startup is losing more money than the next, and they’re uncovering huge legal, liability, and governance problems, like cities throwing them out or cranky citizens tossing scooters into the Seine, for example. Everybody said, “Ohh, scooters. That’s the next Uber.” If you say “It’s the next Uber” before or after any product name, you are almost guaranteed to start a herd of investors and young entrepreneurs going down that road.
It happens in category after category and it creates two problems: for one, it wastes a lot of time and money; and, more importantly, it creates a cluster around a category that makes it harder for the stars to shine. To add to that, it also makes it harder for the dogs to die: somebody inevitably has to invest in scooter startup number seven, because there are people whose job it is to invest and to follow trends and so forth.
This creates massive clutter in the startup marketplace, and that also creates a sort of boredom for the ultimate consumer. “How many of these scooter ads am I going to look at? I’m sick of scooters.” That kind of thing. I think, to some degree, it’s human nature. “Oh, this is the latest hot trend.” It’s sort of like, well, this year, skirts are going up, and next year they’re going down. Stiletto heels are now nine inches and the line at the emergency room starts here.
If you look at the array of today’s ‘hot trends,’ we have big data, artificial intelligence, IoT, driverless cars. We have driverless delivery vehicles, driverless over-the-road trucks. Each one of these is being chased by a herd of cats wearing lean startup sweatshirts.
To end off, could you leave us with one work or life hack that you use on a daily basis and you believe keeps you motivated or successful?
For me, nothing is better than face to face, across the table. There’s this overwhelming rush to automation and trying to automate everything, but at the end of the day, humans buy from humans, not websites or companies. They talk to humans. We are losing that at an alarming rate. So, my life hack is all about, let me get around the table with people who matter, because that’s where good ideas come from.
Bob Dorf is a startup coach, consultant, and trainer. He has founded seven startups and has invested in 30 more. Bob also co-authored the “Startup Owners Manual,” a global bestseller that helps entrepreneurs to drive startup success. Bob provides hands-on training programs for startup groups and has guided thousands of startups in reducing the failure rate of innovation.
Illustration by Damian Didenko.