The Entrepreneurial Challenge

2010 has just begun, and depending on who you talk to, we're either still in the Great Recession, or it recently ended. Either way, there are millions of people in the U.S. and around the world who will remain unemployed or underemployed even after the economy recovers. As a society, we have both a moral and economic imperative to help these people get back on their feet. As a country, the U.S. can't survive with a hollowed-out manufacturing base, and having Wal-Mart or McDonald's as employers of last resort helps no one.

I believe that the end of the Great Recession presents a tremendous opportunity for individuals who want to start their own businesses. For many people, entrepreneurship will represent their best, or even their only, means of getting back on their feet financially. The challenge for those of us who have spent most of their careers in Silicon Valley and other entrepreneurial centers is to bring that startup culture to people who need it.

We've got the tools to spread ideas quickly and inexpensively; we need to use them to encourage new businesses, no matter where they're located. We also need to adapt our philosophy and techniques to the needs of entrepreneurs outside the major technology and business centers. It's far more likely that these new entrepreneurs will start a restaurant than a software company, and very few of them are ever going to have a business that's likely to go public. We need to help them build sustainable, profitable businesses that will allow them to make a good living and support themselves and their families.

What does "Pivoting" really mean?

Lean Startup and Customer Development are techniques/processes being used by a lot of startups, especially software and services companies. A term commonly used in both techniques is "pivoting". It means that the company changed direction--it was developing a floor wax, which no one wanted, so it "pivots" to develop a dessert topping. Gratuitous SNL reference aside, what usually happens is that the company developed a product with one feature set, then learned that what customers really wanted was a different feature set. In forums on the Web, I often read about companies that pivoted, sometimes three or four times.

What pivoting really means is "We got it wrong." Don't take this the wrong way--I've gotten it wrong many times in my career--but often, a company could have avoided pivoting if it had done more homework upfront. So, how do things go wrong?

• The team understands technology but not the market: They spot what looks like an opportunity, but they don't really understand the domain all that well, so they define a product or service that looks good to them but not to their target customers.
• They talk to customers but don't listen: Even when a startup sets out to talk to customers, they dismiss negative feedback--perhaps their product is "too advanced" for the customers they're talking to, or the problems that customers are expressing aren't really problems, or frankly, their customers are stupid.
• They don't ask the right questions, or they don't ask them in the right way: Large and small companies alike distribute huge, complex, poorly organized surveys that scare off respondents, get low response rates and are too small a sample to be representative of their target customer base. Or, they use focus groups, which have their own set of risks and are often used the wrong way (the company wants to get projectable results when they actually get impressions from a small subset of customers).
• They copy what competitors are doing: The team starts with an existing product or service and then does a variation--cheaper, faster, or more features. That assumes, however, that the competitive benchmark is actually successful or has features worth replicating. It may turn out that the competitive benchmark isn't successful, and the company ends up replicating a failure.
  

The solution is to understand more, earlier in the process. Whether that means talking to more customers, asking the right questions in the right way, doing more secondary research or bringing a domain specialist into the team, knowing more upfront is likely to result in a better product/market fit, fewer pivots and faster revenue growth and profitability. None of this invalidates creating Minimum Viable Products or an iterative product and customer development process. It just means spending more time to insure that you're pursuing a real opportunity and not a mirage.