Thus, the moment you declare MVP is an incredibly important turning point for your startup.
KEY TAKEAWAYS
■
Here are some milestones to help you determine when it’s time to declare MVP:
Product—You know you can declare MVP when user and customer feedback suggest that at least 80 percent of those polled actively use and endorse your offering and are willing to promote it to other people and companies: in other words, when you receive a positive NPS score. Key product and feature assumptions—especially usage and churn (loss of customers, covered later) rates—also need to have been verified by data.
Revenue—The management team should still be largely responsible and actively engaged in all the marketing and sales processes. The company should be focused on refining positioning, marketing, and sales campaigns, and it should identify any points of friction so that it can smoothly move to Minimum Viable Repeatability. The period between MVP and MVR should be used to confirm or iterate the initial assumptions regarding market, category, customer/consumer acquisition techniques, pricing models, customer/consumer acquisition costs, sales cycles, etc. This is the time to begin planning a full company and product launch.
Team—The team should now be expanded to include a few members who can help with support, customer success, and revenue creation and processing.
Systems—The company should be able to easily construct agreements, take payments of multiple kinds (e.g., e-commerce, purchase orders), and provide remuneration. The company should be preparing for the first scaling phase—MVR—by ensuring that its systems are capable of quickly and cost-effectively adding people, customers, and partners; processing invoices and internal expenses; and generating analytical insights into the key operating metrics of the business.
Mark Organ is the founder and former CEO of Eloqua and currently the founder and CEO of Influitive. Eloqua, founded in 2000, was one of the first marketing automation companies and was purchased by Oracle in 2012 for around $800M. In getting to MVP, Mark counsels companies as follows:
Product—“Fall in love with your customers. Spend time with your end-users.”
Revenue—“Don’t hire a VP Sales yet—you don’t need it.”
Team—“Don’t over-title people at this stage. And only hire top talent. At Eloqua, only 1 out of 9 remained on the senior leadership team post-IPO.”
Systems—“You don’t need much. We used Salesforce. We focused on pipeline snapshots—from the last week to the next. We used email and chat and had a website.”
Now is the moment to begin in earnest the exhilarating ride of the go-to-market phase, and getting to Minimum Viable Repeatability (MVR). We’ll look at that in-depth in the next chapter.
Traction Gap Architectural Pillars
FIGURE 23
Percentage of emphasis during this stage.
The following are the key principles Wildcat Venture Partners looks for at MVP:
■ Traction Gap Principles ■
MVP
Product
Measure your customer engagement and usage rates, not just the number of customers.
Revenue
Select revenue metrics carefully and maintain a disciplined focus around them.
Team
Hire slow, fire fast—quickly remove toxic team members.
Systems
Keep your burn low—too much funding can cause bad behavior.
Traction Gap Hacks ▶ MVP
Storytelling
If you are the CEO of a startup, the leader of a division, or a spokesperson for a company, you must be—or become—a great storyteller. And you must create a great story to tell, an epic story, about your product. Too often, we get trapped when we talk about our company and its products. We may think they are great, but the rest of the world will not be convinced unless we capture their attention in seconds and make a compelling case for our position.
A holiday movie classic at my house is the 1988 film Scrooged. Starring Bill Murray as a modern Ebenezer Scrooge, the story is set in a powerful media company, IBC, with Frank Cross (Murray) as an advertising agency executive.
In one of many great scenes, Frank shows his staff his version of a TV commercial hawking IBC’s adapted-for-TV airing of Scrooge.
For the commercial to succeed, Frank declares that it must get viewers to watch IBC’s special on Christmas Eve. His ad features scenes of acid rain, drug addiction, a freeway killer firing a shotgun, and an airplane being blown up by terrorists. Frank states that the purpose of the ad is to remind people of how terrifying the world can be—is—and that Christmas is needed now more than ever. The narrator then delivers the pitch with: “Don’t miss Charles Dickens’s immortal classic, Scrooge. Your life might just depend on it.” With gasps and frightened looks, Frank’s staff is appalled over the commercial, but Frank confidently says,
“Not bad, huh?”
The point is that while Frank Cross’s commercial may be just slightly off base, his message isn’t. Especially so in today’s world, where everyone is constantly bombarded with messaging. Your message—your point of view—needs to be strong enough to cause people to stop what they are doing and pay attention to what you have to say.
To accomplish this, you must begin with a story of epic change with an equally epic hero (your company/your products). If you can find that epic story, and tell it in a cogent and powerful way, your prospects, your customers, and your investors will listen to what you have to say.
One of the best storytellers in technology was Steve Jobs. He always began his presentations by introducing his audience to a new reality and inviting us to “think different” about what the benefits of that new reality might be. When he introduced a product, it was always “insanely great,” designed to enable us to think and act differently.
Marc Benioff, CEO of Salesforce, is another great storyteller. In fact, his annual user event, Dreamforce, which attracts 100,000 people or more each year to San Francisco and online via real-time streaming, is a giant one-week “storytelling” event.
Every year, Marc uses Dreamforce to introduce his latest vision, combined with celebrity entertainment and parties. Marc is always front and center, the ringleader of the show.
Is this about fun and games? Absolutely not. Marc knows this is his annual opportunity to educate, while entertaining the vast numbers of people and companies to whom he markets and sells. Everyone who attends Dreamforce—physically or virtually—comes away knowing precisely what Marc’s and Salesforce’s priorities are for at least the next year.
Marc leads off by introducing and discussing a key problem the world is facing—and always ends with his announcement and demonstration of his newest product that will solve that big problem, usually accompanied and endorsed by a big-name Hollywood performer, professional athlete, or tech celebrity to make sure you are paying attention. For example, in 2017 Marc made “trailblazers” the main theme. He claimed: “Everyone has the power to be a Trailblazer and make the world a better place.” Using this theme, he introduced the notion of a Salesforce Economy, driven by developers, CEOs, administrators, and anyone who is part of the Salesforce ecosystem. Marc went on to state that this ecosystem would provide more than 3 million new jobs and nearly $900B in new revenue by 2022. Then, he followed up this inspirational message by introducing a slew of new products designed to make Salesforce trailblazers even more successful.
This way, when a Salesforce account rep meets with a customer or prospect after the event, the “target” has already been softened and is open to hearing about the new Salesforce offering.
Dreamforce is a full out-of-body experience designed to tell you a story—several, actually—and to reinforce that new reality by enabling you to interact with 100,000+ of your new best friends through the experience.
In the chapter about Minimum Viable Category, I shared with you how GreenFig, an EdTech company, arrived a
t its MVC as a microeducation company offering microdegrees in applied business science.
Now, let me share with you how GreenFig’s CEO tells the same story.
The story doesn’t begin with GreenFig; it begins with a big problem we all face, in this case, the prospect and fear of machines taking over human jobs, potentially relegating millions of people to the unemployment line.
It begins. . . .
The 21st century, a digital economy, and digital transformation are currently affecting every company, globally.
Digital transformation won’t just affect technology.
It will transform the global workforce as we currently know it.
Many of the jobs currently filled by humans will disappear, just as manual-labor jobs were replaced by machines during the Industrial Age.
In the 21st century, the First Intelligence Age, machine learning will replace as many—if not most—traditional roles held by humans.
How will we as a society prepare ourselves?
Universities are still teaching primarily the same content in the same way they always have.
And core subjects in English, history, etc. are still highly relevant to ensure that we all have a basic understanding of who we are, where we fit in, and how to communicate and work with each other.
But unless you are studying for a career in STEM, you will likely not graduate with the skills that will result in immediate employment after graduation.
That said, were you aware that only 6.5% of all US jobs are STEM-related? Did you know that only 24% of all high school seniors score 650 or more on the math section of their SATs, the minimum required to get into a good STEM program?
The fact is that 40% of US companies require workers skilled in operating the 21st-century “soft machinery”—business application software.
These are jobs in sales operations, marketing operations, demand generation, service, support, customer success, etc. These roles require people who are trained business scientists, not computer or data scientists.
More than STEM, industry needs workers who understand the “science” of a business function and who are certified in how to operate—not code—the business application software that powers those functions.
Application software from industry leaders such as Google, Salesforce, Marketo, Oracle, SAP, and many others.
Business scientists must be critical thinkers, collaborators, and creative thinkers. This is what liberal arts programs foster. As a result, people with liberal arts degrees are ideally suited to become business scientists.
Who is solving this problem?
GreenFig—a microeducation company offering microdegrees in applied business science. GreenFig’s mission is to train business scientists.
The remaining “actors” of GreenFig’s “story”—its offerings, its format, etc.—are all just the supporting cast in the story. And, as you no doubt noticed, GreenFig presents itself as the hero that saves the day.
By connecting with a global issue that everyone knows is happening, and is equally concerned about—and then offering a potential solution to the problem—GreenFig is able to rise above the noise. In the story’s setup, its offerings, its business model, and its competitors weren’t mentioned.
GreenFig also knows that it needs to earn permission to tell you those things. Before you will listen, it needs to tap in to your emotions. Once it accomplishes that, you are prepared to actively listen to how GreenFig fits in and stands out in the education market.
So, what is your “epic story”?
What is the big problem you have identified and are solving?
Does it tap into a movement or issue featured in the media or the global markets?
Is it something people are already familiar with or recognize as an issue?
Can you quantify the problem in terms of its magnitude—that is, the cost in human or financial capital?
The more you can accomplish each of these things, the more likely it is that you will capture your audience’s undivided attention.
■
PARTNERING FOR SUCCESS
Early-adopter customers are different from early-market customers, and the former can’t serve as references to reassure the latter. Use partners (established companies or other, more advanced startups) to overcome this problem (chasm).
What is one factor all business software startups—at any stage—need to succeed?
Partners.
You can’t go it alone. You don’t have enough capital or brand power.
Sure, you will start out on your own. But by the time you reach MVT, you will need to have cultivated a few partners you can work with to help you overcome many of the key issues you will face beyond MVT.
And although you may only be at Minimum Viable Product, it’s not too soon to determine which companies would make good partners for you to reach MVR, MVT, and beyond, and to develop a strategy to work with them.
As a startup, you are most likely to market and sell to the Early Adopters and Innovators, as described in Geoffrey Moore’s book Crossing the Chasm. To find your way onto the proverbial “Main Street” requires reference selling—and not just any old references. Those references must come from companies similar to the prospects with whom you are speaking. Early Adopters want to see others like themselves using your products before they will buy.
The problem is circular. So, in Crossing the Chasm terms, you must begin to scale and move from Early Adopters to companies that are part of the Early Majority, a much larger market. How do you secure those first wins?
One way to solve this problem is to identify and work with a company that has already established credibility with the Early Majority to “borrow their brand.” That is, by partnering with you they are implicitly endorsing you with prospective customers and can give you the needed brand power you don’t currently possess.
By partnering with a startup, an incumbent can bring new capabilities to its customers and prospects and fill in gaps in its current product offerings. In return, the startup, of course, gains access to companies it would not ordinarily be able to reach on its own.
Another approach is to join forces with other startups with complementary products and services. By jointly participating in events and other demand-generation programs, you can dramatically reduce the cost of customer acquisition and brand awareness.
In the process, you will also create a symbiotic ecosystem that is reliant upon your success for its own. This ecosystem will serve as an effective barrier to help you thwart emerging competitors.
I know a little about this topic because I was responsible for creating and expanding the Siebel Systems partnering program from its inception. Siebel made partnering a core competency and used it as a competitive weapon. In just four years, we grew from our first partner (Accenture) and little revenue to more than 750 partners—consisting of systems integrators, hardware companies, software companies, and others, and nearly $2B in annual revenue. These weren’t “resellers”; these partners jointly went to market with us via events, email campaigns, advertising, and sales calls. We worked together, but we sold our products/solutions and they sold theirs. Over time, much of our partners’ lead generation and revenue was dependent upon Siebel Systems, thereby keeping them close and potential competitors at bay.
At its peak, Siebel had more than 200 Alliance Managers working in its Alliance organization, managing relationships with consulting, hardware, software, and other partners important to its mission.
This effort was a significant investment, especially compared with how most companies staff and manage their partnerships. Why did Tom Siebel make this investment? One word: revenue. Our alliance team helped to drive nearly $1B in annual Siebel revenue via these partnerships. We won awards from Forbes and IDC for our innovative approach. As the head of the Alliance organization, I reported directly to Tom because of the importance of this function in revenue generation.
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br /> Unfortunately, most startups and large companies only pay “lip service” to their partner programs, if they have one at all. Few, if any, invest any significant effort and offer “toothless” programs—no commitments by either side—by hiring a few people, placing them under the Sales, Marketing, or Products organizations, and then expecting the group to work with dozens, even hundreds, of companies. And they wonder why their partner programs produce very little in terms of tangible business results.
If you want real partners and a partner program that delivers results—revenue and market share—here are some basic principles you should follow:
The partnership must be sponsored and supported by the CEO.
Both companies must assign and hold accountable at least one person from each company to achieve the objectives of the partnership.
The people assigned to the partnership must develop a joint business plan that describes the objectives of the partnership, including revenue targets, key accounts, technical integrations, comarketing activities, etc.
Both companies must commit to invest in an agreed amount of comarketing activities to create brand and demand awareness.
The CEOs and those responsible for the success of the partnership must agree to meet quarterly to review accomplishments and any issues associated with the partnership.
Traversing the Traction Gap Page 15
