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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

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

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!

We Have Moved to Galvanize Seattle

Last week, we moved to Galvanize in Pioneer Square, Seattle. After touring many spaces and thinking about strategic, economic and ecosystem considerations, Galvanize seemed to be the perfect fit for us.

Few reasons are obvious. Galvanize offers some of the best technology instruction here in Seattle and as a result, attracts technology students, entrepreneurs and enthusiasts who are potential applicants to the 9Mile Labs program. During the program, the opportunity for our entrepreneurs to interact and network with other entrepreneurs is invaluable. Once our companies graduate out of the program, they need a home and a place that provides a rich entrepreneur-friendly environment. Galvanize is one of the best work spaces we saw for technology startups in Seattle in our fairly extensive research process.

The benefits were immediately apparent the very first day we moved in. The CEO of one of our portfolio companies was using his “free day” at Galvanize and happened to mention that they were ready to hire their first set of developers. Within the next few minutes, we connected him to Daniel, the Student Outcomes manager who connects Galvanize students with prospective employers. The synergies are brilliant! J

There are many other ways the two organizations complement each other. At 9Mile Labs, we bring in great speakers and host panel discussions about topics of interest to technology entrepreneurs. By making some of these available to the broader Galvanize community, we can amplify the impact of our efforts. The ongoing stream of hundreds of mentors, customers, speakers, entrepreneurs and investors at 9Mile Labs is great exposure for the world-class technology education programs and tech startup-friendly environment at Galvanize. Galvanize’s member startups can benefit from 9Mile Labs’ experience coaching and helping startups with office hours, presentations and informal sessions.

We’re driven by our mission to help build a world-class entrepreneurial community here in Seattle. We believe our move into Galvanize will enable both organizations magnify our individual efforts!

Zero Tolerance for Inappropriate Sexual Behavior at 9Mile Labs

In view of few situations that have recently come to light, we wanted to make a clear and concise statement about an issue that is extremely important to us.

We have a zero tolerance policy for inappropriate sexual behavior originating from investors, mentors or founders at 9Mile Labs. Anyone found to be in violation of this policy will be excluded from our program and events.

What constitutes inappropriate behavior? It includes “sexual harassment” or unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature that results in a hostile work environment.

It is 2016, and this should go without saying, but we’re stating this to be unambiguous about the issue.

The 9Mile Innovation Framework©: Evaluating Startup Teams

In the last blog, we introduced the 9Mile Innovation Framework. Over the next few weeks / months, we’ll elaborate on each one of the milestones constituting this framework. Of course, we’d love your feedback – good, bad, ugly – as we share our thinking.

9Mile Innovation Framework graphic

The 9Mile Innovation Framework

As any investor or experienced entrepreneur will tell you, it all begins with the team. A great team is a necessary (though not sufficient) condition for entrepreneurial success. That implies that you can have a great team and not have a successful business, however you’ll likely never see a successful business that didn’t have a great team at the helm.

While there are innumerable ways to slice this pie, at 9Mile Labs, we think of the team in 3 dimensions: Completeness, Chemistry and Competence.

We think of a complete team comprising of 3 roles – hacker, hustler and visionary. Just to be clear, these are 3 roles, not 3 people. The 3 roles could be fulfilled by 2 people or 5 people. The hacker is the person(s) on the team who can write code and build product. The assumption is that this person is not just a full-stack developer (UX/UI, data, back-end) but can also function at different levels (architect, customer interaction, coder, project manager). The hustler sells. The hustler builds relationships, knows how to be empathetic towards customers, listens well and is great at serving as an advocate for the customer. The visionary is the person who probably came up with the original idea and is likely the key product and design expert on the team. In many ways, the visionary is the soul of the team, has the conviction to not just pursue the idea relentlessly, but also owns the mandate to pivot when necessary.

Chemistry is alignment of the core values and vision of the business among the co-founders. One of the workshop leaders at 9Mile Labs – Lindsay Andreotti – describes vision as the compelling description of where the business wants to go and values as the guiding principles for the business. A great positive marker for team chemistry is if the team has successfully worked together, especially in a high-pressure environment such as a startup. It is important for co-founders to know that they can have an impassioned argument and then go get beers later; articulating your deeply-held convictions, yet knowing that winning the argument is subordinate to the success of the business is critical. If everyone agrees with each other all the time, the team is probably not pushing the limits of its intellectual potential far enough, or else the team is not diverse enough to bring a broad set of perspectives to the table. Politics or hidden agendas, if they exist in an early-stage startup, are a sign of misaligned incentives and a sure-fire indicator of trouble.

Competence is the idea that no matter what the skills of the co-founders, they think of themselves as the being the best in the world. They seek excellence in what they do and always maintain the perspective of competing globally, not merely locally or regionally. This translates into not just their own performance, but also into hiring and firing decisions as the team grows.

Team Graphic1

 

Entrepreneurial Aptitude is one quality that has been the hardest to pinpoint, has the element of “we’ll know it when we see it,” and is perhaps the greatest indicator of success. Entrepreneurial aptitude is a composite of many traits we have observed in successful entrepreneurs, including focus, self-awareness, grit, curiosity, a self-starter attitude, ability to deal with ambiguity and a knack for accomplishing a lot with very little. These entrepreneurs also have the ability to constantly learn, create and apply new rules very quickly as they go through experiences. We find that entrepreneurial aptitude is incredibly hard to measure with the standard evaluation mechanisms such as resumes, profiles, questionnaires or even interviews. We believe the only way to measure it is to watch people operate in the real world. At 9Mile Labs, we have designed a set of real-world exercises in our accelerator selection process to provide us a glimpse into this aspect of the team, we’ll share more as we learn more.

Based on the above, we have devised a simple rubric for helping entrepreneurs evaluate the quality of their team. If the leadership team of hustler, hacker & visionary is not in place, we assign it the color red or highest risk. We believe however, that the existence of a complete team only mitigates some level of risk, even with the chemistry and competence on the team, hence it gets a “yellow” rating. The team has achieved a green only if the founders have a proven ability to bring on board the best and the brightest people to support their vision. Most people can attract someone into Google or Facebook by offering great pay and benefits. However, as a startup, the only currency the founders have is equity and more important, their conviction and passion around the startup. Once a co-founding team can inspire others with their vision and dream, that’s when the team turns “green.” This capability is also a test for the selling abilities of a CEO. You see, the CEO is always selling, to customers, investors and to potential recruits. If you can’t sell great people to come on board your company, it’s only going to get harder.

Team Graphic2

 

In our next post, we’ll elaborate on how we coach our teams to think about understanding the pain point of their target customers.

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.

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.