Entrepreneurship

The 9Mile Innovation Framework©: Understanding Customer Pain Points

In our last blog post, we discussed how we think about evaluating teams as part of The 9Mile Innovation Framework while building a technology company.  

9Mile Innovation Framework graphic
9Mile Innovation Framework graphic

This post discusses the most important step entrepreneurs must take as they start a business, i.e., understanding the pain point of their customer.

Who is the customer?

Even before understanding the pain point of the customer, entrepreneurs must first deeply understand who the target customer is. Very frequently, entrepreneurs will say “everyone is a customer.” That is a dead giveaway that these entrepreneurs have not yet spoken to enough customers, or have been building on the idea based on their own assumptions about the customer’s problem. Quite often, the entrepreneur themselves encountered the problem and then made an assumption that every professional like them had the same problem. While there’s nothing wrong with starting off with a problem that you had as a user, the work of building a business doesn’t end there.

Part of the customer identification process is also about getting a sense of how many of those customers are there and how big a business could this be. Let’s say I’m an avid curler and am unable to find other curlers in the Seattle area. Bingo! What about an app that allows me to connect with other curlers?! I talk to my curler friends and they don’t seem interested in paying for the app, but I could sell the eyeballs! But as I start thinking about the number of curlers in Seattle (then broadly the U.S. and North America), the number of times they go curling (without a partner) per year and the cost of a curling session, it doesn’t appear like this is really the next billion-dollar app after all! I might know about the customer and really get their pain point, but in order to build a scalable, repeatable and profitable business, I need a significantly large market.

The art of the “no-sell sell”

So how does an entrepreneur understand a customer’s problem? By talking to customers (thanks Mr. Obvious!). In fact, the most important job of an entrepreneur is to not talk, but to listen. And this is non-trivial. The temptation for an entrepreneur is to share their business idea with the customer and to get the confirmation that they’re indeed on the right track. And being the super-optimists that they are (why else would they be embarking on a fool’s errand such as a startup? J), when the customer so much as nods their heads, they take it to mean that the customer has endorsed the product and is now ready to buy. That, we find, is the fatal flaw in most customer interviews.

However, here’s what’s actually going on in the customer’s head. As soon as the entrepreneur started describing the idea, the customer knows that they’re being sold to. A wall of defense goes up, a fake smile appears and the eyes start glazing over. On the inside, the customer is thinking, let me just give this enthusiastic individual some positive feedback so I don’t burst their bubble, tell them that their idea is interesting and get the heck out of here. Because a number of them feel cornered, once they’re done with the interview, they’re done with the entrepreneur.

There are 3 missed opportunities here. First, the entrepreneur failed to use this conversation to gain an intimate understanding of the problems the customer encounters in her daily work. You’ll be surprised to see the amount of information and stories people will share when you treat them like an expert and let them talk. People love to be put on a pedestal and listened to. And when they know that you really care about THEIR problems, they’re willing to give you a second or a third interview. And that is the second lost opportunity. Instead of building a relationship, the entrepreneur focused on the transaction and will find it hard to get another audience with this customer.

And that is the third and probably the most significant missed opportunity. The entrepreneur has lost the opportunity to turn this prospect into a real customer through the process of “no-sell sell.” Through the process of building empathy with the customer’s pain point, the customer becomes a willing accomplice in the MVP (Minimum Viable Product) development process. As the customer sees their problems being addressed and coalescing into a solution, they’re willing to try it out. If the dialog ceased at the first meeting, there’s no such engagement. Clearly, this engagement must happen in parallel with many customers before a solution is developed around it.

What questions do I ask in a customer interview?

Tactically, there are many resources out there to help entrepreneurs with customer interviewing. A couple of resources that we’ve been recommending to entrepreneurs are

Both resources are really good and emphasize the importance of asking open-ended questions and listening to your customers.

Where do I find customers to interview?

One other question that we’re frequently asked is where do you find customers to interview, especially if you’re a B2B startup. If you’re trying to build a solution around a problem you’ve encountered yourself in a business setting, you probably know professionals in your field. If you’re not “pushing” your idea at every opportunity you get, then you’re probably building relationships rather than burning them. One technique to utilize at the end of every interview is to ask the interviewee if they know of someone else that you could talk to about the topic. If they’re assured that you won’t be trying to sell your solution to their friends, they’re much more likely to make those introductions. In addition, as you build your relationships with mentors, coaches and others around you, leverage those relationships to get additional introductions.

How should I prioritize the Pain Points?

As you talk to prospective customers as part of your customer discovery process, you’ll encounter many pain points and certain recurring themes will begin to emerge. There are few techniques around clustering these pain points that we’ll discuss in a future blog post. However, what is clear is that it will be hard for these clusters to show up without a sufficient number of customer conversations.

A maturity model for defining pain point

So how do you know you have done sufficient customer development around pain point? We have a simple rubric to think about pain point. You’re Red if you’ve just started working on the idea based on your own assumptions about the customer’s pain point, but have not yet spoken to enough customers. You’re a Yellow if you have spoken to anywhere from 10-20 (business) customers and have refined the statement of the problem based on their feedback. You’re a green if you have spoken to enough customers so you know and understand the time and money it costs the customer as a result of these pain points.

Pain Point Rubric
Pain Point Rubric

To summarize, entrepreneurs must understand the importance of getting intimate with their customers and their pain points. Focusing on understanding the pain points eliminates the hesitation that many entrepreneurs have to engaging with customers; what they don’t realize is that they’re doing the “no-sell sell” with this process. Everyone wins as a result of this work!

The 9Mile Innovation Framework© - A Structured Methodology for Building Technology Companies

When we ventured into the startup accelerator business over three years ago (read our story here), we knew we were headed into brand new territory. The startup accelerator business model was pioneered in 2005 by Paul Graham at YCombinator (YC) and then subsequently adopted by many others after high-profile YC successes such as AirBnB, Dropbox, Heroku and others. We were perfectly happy to replicate a proven model, but we also wanted to ensure we continued to learn, iterate, refine, and innovate.  And the only way we knew how was to constantly talk to our customers - i.e., entrepreneurs and investors - and try to deeply understand their challenges and pain points.

These conversations are the genesis of the 9Mile Innovation Framework, our foundational methodology for helping launch and grow startups. Using Steve Blank’s customer development methodology and Alex Osterwalder’s Business Model Canvas (BMC) tool as a starting point, we began to build our own proprietary framework for company creation and growth. While we found the BMC to be a great tool, we also needed a foundational framework that helped us with the following

  • - A tool to assess a startup’s progress over time, including a self-assessment tool for entrepreneurs to track their own company’s performance.
  • - A high-level model for creating enterprise and B2B startups that are focused on solving real-world problems and on customer traction.
  • - Provide us a common language to discuss startup progress, challenges, and solutions with entrepreneurs, mentors, speakers and investors.
  • - A clear foundational structure for our entrepreneurship and company-building curriculum.

With the 9Mile Innovation Framework, we have a tangible rubric we can use to gauge the current and future success of the companies graduating from the accelerator. Since 9Mile Labs is only successful if its companies are successful, the framework also serves as a measure of how our own business is progressing. Applying the framework to everything we do, there is no hand waving, subjective arguments, or seat-of-the-pants rationalizing. If something isn’t working, we go back to the drawing board and refine our framework.

Just a side note: we don’t claim that every concept in our Innovation Framework is original. We read books, browse startup-oriented publications, follow prominent bloggers, and speak to many people every day. And when some concepts resonate with us, we incorporate them into our thinking – consciously as well as inadvertently. For example, we read a startup-oriented book called Nail It, Then Scale It and really liked that term and started using it; we heard the term “Hacker, Hustler, Visionary” from somewhere else and promptly borrowed it. All innovation builds upon existing ideas; progress comes when you pick “borrowed” ideas and build on them with original thinking (read “Borrowing Brilliance” by David Kord Murray).

The 9Mile Innovation Framework has nine key strategic steps necessary to build any company from idea-to-execution (Figure 1). We call the first five steps in our framework the “Nail It” stage, so termed because investment in scaling activities such as marketing and sales is useless until a startup has achieved these five basic milestones. No business should spend time and money building a product that no one wants. It’s also important to note, that even though there’s a certain sequential nature to this model, startups of course sometimes hit these milestones in different order. Here’s a brief description of the five steps in the “nail it” phase of our framework:

  1. 1. Team: Investors, especially early-stage ones, invest in teams first, then the market and idea. At 9Mile Labs, we look for a complete team comprising three roles - hacker, hustler, and visionary.
  2. 2. Pain Point: The business idea for a startup must be rooted in a well-understood pain point for a specific customer segment in a significantly large market.
  3. 3. Competitive Differentiation:  Every early-stage startup must have an understanding of, and build strategies for creating sustainable differentiation against competitors.
  4. 4. Value Proposition: The value the customer receives from the startup must be significantly higher than the total cost of ownership from using the startup’s solution.
  5. 5. Product: The actual product the company builds, first as an MVP, later beta, and then as a complete product, must be based on an in-depth understanding of the customer’s pain point and the value delivered to the customer.

 

9Mile Innovation Framework graphic

Figure 1: The 9Mile Innovation Framework

Achieving maturity on the “Nail It” steps leads a startup to the “Scale It” part of the framework. The startup has the beginnings of a good business and now needs to take things to the next level. Of course, the “Scale It” part of the framework remains iterative as well, with startup teams learning what works and what doesn’t as they work to build a scalable, repeatable, and profitable business model. Things change, and the entrepreneurs must be ready to go back to square one or pivot if necessary. Here are the four steps in the “Scale It” part of our framework:

  1. 6. Go-To-Market: Create clear messaging and positioning statements that resonate with the target customer segment, as well as demand generation strategies to target those customers.
  2. 7. Customer Traction: Tactics and strategies employed to achieve and track exponential, proven, sustainable customer growth against non-vanity metrics.
  3. 8. Business Model: Bringing together much of the work in prior milestones, the business model must be scalable, repeatable, and profitable.
  4. 9. Funding Strategy: Every startup should clearly think about its funding needs and explore options such as customer revenue, strategic, angel, or venture investment.

Creating the 9Mile Innovation Framework grew out of our conviction that, while raising money is a very important activity for a startup, a much more important success metric is customer traction. However, amid headlines about unicorns and multimillion-dollar funding rounds, startups sometimes start thinking of funding as the ultimate objective, as opposed to a means to building a successful business.

Following this broad introduction to the 9Mile Innovation Framework, in the next post, we’ll dive into the specifics of each milestone introduced above. First up, the team. Tune into our next post to find out how we evaluate successful teams.

9Mile Labs is a leading Enterprise / B2B high-tech accelerator based in Seattle. 9Mile Labs celebrates the graduation of its fifth cohort on Mar 3, 9:30am; register as our guest with promo code “GOLD” at http://m9.9MileLabs.com

The accelerator is currently accepting applications for the upcoming program (beginning in July, 2016) at http://apply.9MileLabs.com.

Top 5 Traits of Great Startup Leaders

The top reason for most investors to commit funding into a startup is the founding team. Clearly, the leaders of a startup set the tone for the entire team. So how does one identify a good leader? At 9Mile Labs, we've attempted to tease out the traits of great startup leaders. We term these traits “Entrepreneurial Aptitude” and constantly look for these among startup teams, especially during our cohort selection process

1. Self-awareness: Successful entrepreneurs know what they don't know. Successful leaders recognize their gaps and want to surround themselves with people smarter than and different from themselves. This awareness is a critical determinant of hiring, funding and mentoring decisions. Great startup leaders appreciate the importance of listening and learning, can handle the push back, and don’t surround themselves with yes-men.

2. Strong bias towards action: Speed is a critical determinant of success in a startup. It's better to make three wrong decisions now and learn from them to arrive at the right one than to have endlessly (over-) analyzed in the quest for perfection. Successful leaders have a sense of urgency, are comfortable with risk and trust their instincts.

3. Fluid intelligence: Great leaders have the ability to learn and make new rules as they go along…by first recognizing that the old ones just don't work any more. While remaining flexible and nimble, good startup leaders are able to maintain the fine balance between coachability and deep conviction about their vision in the face of all odds.

4. Internal motivation: Great startup leaders don’t need to be coaxed out of bed in the morning, they don't make excuses for failure, and they don't ask or wait for permission. They take accountability for their decisions and believe that the buck really does stop with them.

5. Ability to motivate and lead others: These leaders are able to infect others with their irrational optimism even while being transparent about the facts. They take responsibility for bad decisions and give credit to team members for the good ones. Great startup leaders are able attract others into working with them for next to nothing because of their sense of mission and caring.

Just to be clear, this list is by no means static and will continue to get refined; it also does not obviate the need to trust intuition and gut instinct. But the attributes listed above continue to rise up to the top in our discussions.

If this sounds like you, then don’t give up! If your idea doesn’t work the first time or doesn’t fit into a market opportunity, you likely have what it takes to evolve it or fail quickly and start working towards your next idea.

Startup accelerators are an exceptional source of support for helping to develop leaders and businesses for market-readiness in months. The 9Mile Labs B2B startup accelerator is accepting applications for its Spring 2015 cohort now, with information and applications online here.

Meet the Accelerator —9Mile Labs partners presenting, judging and hosting this month

It’s October. Wow, already? But it’s a busy month with Cohort III at the midway point and serious work ahead! It’s also one of our favorite months at 9Mile Labs because of the bustle of B2B tech activity in the Northwest, much of which we look forward to participating in. Here’s a snapshot of where to find our team this month… B2B Startup Meetup October 8, 6:00-7:30 pm, 9Mile Labs Offices, 999 3rd Ave., Suite 700, Seattle

The Northwest's first B2B tech startup Meetup kicks off October 8 in our offices. Sponsored by Altus Alliance, Summit Law Group and 9Mile Labs, the Meetup will launch important discussions about the most fundamental, yet essential tool every B2B company needs to know and understand: a winning B2B sales process. Effectively designed and executed, the sales funnel will determine your marketing needs, headcount, forecast, product roadmap, bottlenecks to close, how you compare to others in your industry, and a lot more. RSVP here.

DreamForce

October 15, 5:30-6:45 pm, The Westin St. Francis San Francisco on Union Square

9Mile Labs Partner Sanjay Puri will present on the panel “Meet the Catalysts - Advice from the Hottest Enterprise Accelerators." Come to hear from the directors of some of the hottest enterprise Accelerators around, and find out if an Accelerator program is right for your business startup.

Startup Next

October 14 through November 12, Startup Hall, 1100 NE Campus Parkway University of Washington

9Mile Labs Partners Kevin Croy and Sanjay Puri are judging and advising young entrepreneurs at this awesome month-long event. Startup Next is the #1 startup pre-accelerator in the world, helping graduates get accepted into 9Mile Labs, Techstars, 500 Startups and many other top accelerators.

DubHacks

October 17-18, The Hub, University of Washington

DubHacks hosts the top college hackers in the northwest, and Kevin Croy will help judge the next generation of innovative software and hardware tech. This is a killer event for seeing the latest innovations coming out of UW, and every demo, app and idea reveal seems more impressive than the next.

 

And looking ahead to November, you’ll want to save the date for:

B2B Startup Weekend

November 7-9

After sponsoring the world’s first B2B Startup Weekend, the 9Mile Labs team is excited to sponsor another edition of this event. Sanjay and Kevin will judge and mentor another hot new pool of entrepreneurial talent at this year’s Startup Weekend. Don’t miss the event that is the drumroll to one of our biggest events of the year: Milestone9!

Milestone9

November 20, 2:00-6:00 pm, Washington State Convention Center

Our bi-annual event features the graduating companies from the current 4-month 9Mile program. We’re planning incredible speakers, content, technology demonstrations and an opportunity for startups and entrepreneurs — whether out of college or out of Microsoft and Amazon — to meet the investors, mentors and advisors that can help build their companies into hot market performers! Email us if you’d like an invite to this event.

Sell it Before You Build It.

If you want to have paying customers, and increase your chances of funding you must, “Sell it before you build it.” That was the title of my recent talk at 9Milelabs, a Seattle-based accelerator that provides mentors and other resources to startup companies looking to get off the ground. The key message of the talk was this: by interviewing 100s of prospects in your proposed market, you can segment the target market, identify must-have versus nice-to-have features, and secure buyers for your product before you’ve written a single line of code.

This process is called “Market Validation.” We adopted market validation while building GoToMeeting, AppFolio, and now SecureDocs, a virtual data room used for both startup fundraising and mature companies going through M&A or IPO.

Most people think of GoToMeeting as the 800 pound gorilla of web meeting solutions. When we launched GoToMeeting, success was a long shot. There were 100+ other collaboration solutions already on the market from companies like Webex, Microsoft, IBM, and Lotus. As a new entrant, the small guy, market validation provided a roadmap on how to compete with the big guys.

Here are some specific examples of how GoToMeeting benefitted from market validation: By segmenting a specific part of the market (SMB), we were able to do away with 80% of product “requirements,” the majority of which were only applicable to enterprise companies. Instead of planning based on what we thought we knew about the web-collaboration space, we actually talked to hundreds of people- all potential customers- and in the end decreased the work we needed to do by months. SMBs didn’t care about 87 different features. They only cared about 3 things: Ease of use, price point, and sharing their screens as quickly as possible. Instead of 87 features, we focused on a download that was 200K or less, a UI with an oversized play button, and an all-you-can-meet pricing strategy. We also validated the business model to make sure that the proposed price point would allow us to acquire customers both online and through sales.

By spending the time up front, we avoided wasting time building a product the market didn’t want and we had customers willing to pay for the product when it was done. Take these lessons and apply them to your business. Get out there and validate!

For added incentive, consider this: early-stage companies with paying customers are much more unique and attractive to VCs, who review hundreds of “promising” companies every year. Sell it before you build it and you are much more likely to be rewarded in your business and fundraising efforts!

About the author:

Albert Oaten is a serial entrepreneur, investor, and VP of Market Development at SecureDocs, Inc., a partner of 9Mile Labs, offering free virtual data rooms to all 9Mile Lab companies raising their first round of funding.