Innovating, Part 1 – Knowing Your Market

Some friends of mine, Alex LaPrade and Ray Angel, have started an investment fund, Lion Fund.  One of their investment precepts is that market is more important to a startup than team.  The fact that this is contrary to the traditional belief of betting on the team is the subject for another day.  Today, however, I’d like to discuss the similarities between this element of Lion’s investment philosophy and the innovation process I employ and write about.

As Alex puts it in a post titled “A Contrarian Thesis on Startups for the Rest of Us” …

“Before gambling on whether an idea will work or not, start with market research (yes, it sounds like it’s straight out of a 1950′s B School class) and find out what is valuable to this market.  Remember, the more valuable your product or service is (and the bigger the pain point it helps solve), the more you’re able to charge (e.g. more revenue for you and we’re all capitalists, not communists, right?).”

The innovation process I describe in my book Innovation Rules and Tools starts with a step called Discovering Value.  The whole idea is to learn what the various customer segments and stakeholders in the market think is valuable – before you create and deploy your product / service / business model solution.  Like Alex, I think it is just common sense.  Why would I create a solution that is designed to make money until I know what people value (another way of saying pain point)?

Learn What the Market Values by Studying What People Do

The best technique for gaining market understanding is the good old fashioned one-on-one interview – combined with observation.  There is nothing quite like talking with someone (i.e. asking open ended questions and doing a LOT of listening and note taking) for an hour or more and doing a deep dive into their perceptions, beliefs, and values about what they do in that market and how they interact with the product you are designing.

When I talk with customers, I listen for the activities they do (or want to do) – from cradle to grave as they work with the product.  When I hear a new activity, I’ll have them either walk me through it verbally – or beter yet let me observe them doing it.  I learn in depth by asking lots of questions like, “Why did you do that?”, “Why is that important?”, “Tell me more”, “How do you do that”, “Who else is involved”, and more.

Organize Your Market Knowledge by Activity

I like to organize the data I find about a market by the customer’s or stakeholder’s activities.   My colleague Ron Sears at the Design Consortium (I worked with Ron as a protege for 6 years) leads the discussion of his Product Value Matrix innovation process with this …

“The value anyone receives from a product must, by definition, stem from that person’s interactions with the product. If you don’t use, touch or interact with a product in some way, it has no value to you at all.”

If you create a thorough description of each activity (or, as Ron would put it, interaction) for each customer segment or stakeholder group and keep it up to date, you possess a comprehensive guide to value in your market.  I call this “The Book”.  For each activity, it can tell you not only what people want to accomplish, but also what they like, hate, and wish for.

Compare Your Competitors, Yourself, and Your New Concepts

You can use The Book to rate your competitors across each activity, noting what the winner does to achieve success and what the loser does to lose.  Knowing  which competitors do a great (or poor) job with an activity already, how they do it, and why it works (or doesn’t) gives you even more market insight.

You can also use The Book to rate your current product (if you have one) and your new concepts.  This ranking gives you an objective view of where you are behind or ahead.

Even better yet, The Book and ratings will pinpoint for you those activities where no one does a good job today.  These are areas where innovation can have the biggest impact, the areas where your competitors (and even you, so far) don’t seem to understand what it takes to be wonderful.

You are now at the point that Alex described where you are able to tell if a venture idea is wonderful or terrible – or what  I describe makes you ready to start ideation and create a brand new venture idea that is wonderful!

Subsequent posts in this series will describe more about other innovation steps.

For more detail, Innovation Rules and Tools is a practical handbook that describes a complete set of innovation steps that you can use to make innovation happen on demand in your company.  For each step, it describes a set of general rules or keys to success along with multiple tools you can apply from day one.  It is available in paperback and Kindle from



Why Every Entrepreneur Should Cultivate Optimism

Recently I saw a post on Quora answering the question, “What is the single most unfair advantage a person can have?”.  Among all of the usual suspect answers, one stood out.


That short answer, by Sondra Webber, went on to say, “Studies show optimistic people are more successful, and happier, because they believe in themselves and more or less make it happen.”  That answer just happened to hit home for me that day, as I was thinking about the own life and my own entrepreneurial activity.

Pessimists Miss Opportunities

I realized that pessimists lose in three ways.

  1. Pessimists dismiss opportunities when they see them because they don’t believe the opportunities are attainable.
  2. They don’t see opportunities because they don’t believe that it is even worth looking.
  3. When we take a step in a new direction, the vista is different.  Pessimists don’t ever see positive new vistas that are built on the results of positive actions and thoughts.  Worse yet, they see new negative vistas built from the results of their negative direction.

The implications for optimists are the reverse.

Optimists See Opportunities

Optimists are open to opportunities.  They will try something.  Perhaps, as Sondra says, because they believe in themselves.  But perhaps, I think, because they believe in the opportunity, whatever it is.  I see that all of the time in my entrepreneurial friends here at Founders.  We’ll be talking about something, anything.  An idea will pop up.  Somebody will say, “Awesome, what a great idea!”  Someone else will say, “We’ve just gotta do that!”  And then maybe a couple of people will head to a whiteboard or the front windows with some dry erase markers.  Pretty soon domain names are being purchased and code is being written.

Optimists Create Opportunities

Believing that something can be done, and then starting to do it, is enormously powerful.  Starting work on an opportunity puts you in a position where you might see even better opportunities.  As I’ve recently retooled some of my own professional services, the product that I started creating has changed based on ideas I never even imagined until after I started developing the idea.  Had I pessimistically avoided developing the initial idea, I would never have seen the other more powerful ideas.  I’m willing to bet that every entrepreneur has experienced this same phenomenon.

That Helps Entrepreneurs Play to Win

It’s simple.

  • Because optimism helps you see and take advantage of opportunities, you can’t win without it.
  • Because optimism helps you create opportunities along a positive vista, you can’t win big without it.

Cultivating Optimism

Cultivating optimism is not difficult (yeah, I know that sounds sorta optimistic itself).

The first thing to understand is that cultivating optimism is not the same as reducing pessimism.  It is not setting aside time to identify and study those occasions when you have been pessimistic and vow to get better.  When you work to reduce pessimism, your framework is still pessimism, so although you may change you are still grounded in the world of pessimism.

Instead, try taking some time each day to practice being purely optimistic.  Take ten minutes (or more) and let yourself think optimistic thoughts (force yourself at first, if you have to).  Imagine you will have a successful outcome to some of the key things you are working on in your venture.  Imagine you will have a successful relationship with those people that are habitually hard for you to deal with.  Imagine that your team is really, really motivated, full of great ideas, and just plain primed to kick ass.  Imagine that the city looks sparklingly great early in the morning.  Imagine that you have everything it takes to be uber-successful in your market.  Etc.  Just practice being open, concentrate on how all that feels, smile a lot, and see where it leads.

I predict that two things will happen.

  • Your framework will change.  You will begin to think from an optimistic viewpoint, rather than a pessimistic viewpoint.
  • Your perception will change.  More and more each day (outside of your 10 minute practice time), you will see positive opportunities that will help you achieve success.

Have fun!

Getting Technical

In early 2008, Karen Gillie, who teaches entrepreneurship in Fort Wayne Community Schools, said she had a high school student who wanted to job shadow me.  His name was Zach Zuber, and she felt I should meet him because he had a little extra something.

As Karen said, she purposely gives assignments at which many students will likely fail, to stretch them out of their comfort zones.  Earlier, she had asked Zach and his classmates to identify and contact a local CEO and arrange a meeting.  She didn’t expect that too many would actually have the guts to do it.  Zach not only arranged the meeting, but walked out of it with an internship!

We met.  He became a member of NIIC’s (where I worked at the time) first BizWiz student entrepreneur group, and started one of the two first ventures in NIIC’s Student Venture Lab.  In the Student Venture Lab, he was the “business guy” who focused on planning a business venture.  His business plan for Bee Mobile (a text message marketing service) won a local competition.

Business Plan Competition Award 2

Zach Zuber in his office in the NIIC Student Venture Lab
after winning a business plan competition (the real reward was some cash).

He was not, admittedly, the technical guy.  He was pretty clearly the opposite of a technical founder.  He couldn’t program or design – so he had to contract with and depend on others to create his online presence.  I’m pretty sure that he drove himself nuts trying to make that happen on the small budget he had available from Student Venture Lab and competition grants.  Shortly thereafter, he moved to Muncie, IN to attend Ball State University and got hooked up with an incubator there.

In Muncie, he launched the Bee Mobile beta, cold called like a boss, and signed up multiple beta customers.  Things were looking good.  But after a month of operation he found out that the customer validation failed.  Customers loved the service – they just didn’t like paying for it!  Ruh-Roh.

So Zach closed Bee Mobile and started looking for something new.  He stayed in touch with us at NIIC, stopping back to the BizWiz meetups and visiting the Fort Wayne startup folks.

Man Bites Funders Luncheon 2010 Road Trip to Hear Steve Blank in Ann Arbor

At BizWiz making a video blog post of doing cupcakes “manbites” with Ray Angel, Presenting at a Student Venture Lab Funders Luncheon,
With Scott BonAmi & Graham Bredemeyer of Sassi Systems and me to hear Steve Blank.

Along the way, he hooked up with a group of mainly NIIC student entrepreneurs who went down to Indianapolis and won the Spring 2011 Indy Startup Weekend with a venture called GrabaChat (chat roulette without the penises).


The GrabaChat team after winning the Indy Startup Weekend

Zach had the opportunity to meet Zack Klein when Zach came to speak at the TechFest event in 2011 (where Zuber was helping me out at the NIIC Student Venture Lab table).  Being the <sarcasm> shy, reserved sort of guy that he is </sarcasm>, Zuber took the opportunity to cold-pitch Klein about GrabaChat (and got some valuable feedback).

Pitching Zach Klein at Techfest

Zach Klein and Zach Zuber at TechFest

As with many Startup Weekend ventures, the group did not persist, but Zach took a pivot of the concept forward with brand new intellectual property (I saw the new concept – it was sweet), paired with a technical cofounder.  Zach eventually put GrabaChat aside when the technical cofounder decided to leave town and get a J.O.B.   He went off to Bloomington to intern with Sproutbox, spent some time around Indianapolis interning with BizProps, and then one day …

I heard something completely new from Zach.  He was going to become a developer!

He was going to Chicago to learn Ruby on Rails in the Starter League‘s 11-week web development crash course.  He would be living and breathing code for three months.

We’d had discussions about learning coding over the 4+ years since we met – practically every time that he needed to hire someone to develop something for him.  Zach had heard me say more than once that if you take 2 years to study and practice (on your own), you can become very proficient with a language.  In fact, he had been dabbling with customizing the PHP of some WordPress templates, had done some online PHP, HTML, and CSS tutorials, and had mocked up a few websites with HTML and CSS.

But, this was different.  This was all-in, invest lots of your time and money, don’t turn back, serious stuff.  The business guy was transforming into a technical guy.

Fast forward to today.  The Starter League is behind him.  Before the week is out Zach will be leaving for Chicago where he has accepted a position as the technical co-founder of BeNoticed, a startup that plans to “Make finding a job easier for people who aren’t ideal candidates on paper, but are indeed skilled at what they do.”  His partner is a business guy.  The tables have turned a full 180 degrees.

Getting Ready for Chicago

Zach Zuber at Founders studying Ruby before leaving for Chicago

This is a fun story to write – and (i hope) to read.  I’d like to get serious for a moment, and point out two admirable startup entrepreneur traits that we can learn from Zach.

First, through four-plus years, he has stuck to his guns, not given up, and persevered through two failed ventures (and plenty more killed ideas).  He kept looking for ventures and venture ideas.  He kept trying ventures and venture ideas.  He stayed active in the startup communities throughout Indiana – and then Chicago.  His willingness to tough it out, close out the ventures that didn’t work, and keep going is probably the same extra something that Karen Gillie saw in Zach when she first introduced me.

Second, if you ask him Zach will probably say it should have happened earlier, that it took him a long time to make the decision, but he made the scary decision to go all in and learn to code – to become the dev that his ventures always needed.  And then he did it!  The main roadblock that his earlier ventures faced is now gone.  Sure, he’s new as a dev, but can you imagine how he’ll grow with his persistent personality?  I can.

Congratulations, Zach, on getting technical!

Creativity and Work Ethic in the Arts and Entrepreneurship

Today at Maria Popova’s Brain Pickings site, Maria has posted about the book Inside the Painter’s Studio, which looks at the creative sources, inspirations, and working environments and regimens of several artists.

She highlights, and I particularly like, the working philosophy of artist Chuck Close.

“Inspiration is for amateurs — the rest of us just show up and get to work.”

Isn’t that a great quote?  While you take a moment to think about how it widely applies to a lot more than just the arts, I’m going to zero in just one other area – entrepreneurship.

Work Ethic Wins in Startups

It rings particularly true today in the world of startups and entrepreneurship.  Showing up and getting to work (versus waiting around for that killer app idea to materialize or that 100-page business plan to be funded) is exactly the difference between entrepreneurs who succeed and those who either fail or never take off.

When I say “work ethic wins” in the startup community, I am not simply referring to hard work (although startup entrepreneurs certainly work hard).  What I am referring to is the startup community’s bias toward stepping in and getting started … i.e. building something.  A business plan without a product or at least a prototype is discounted as a useless old school exercise.

Today’s startups are strongly influenced by the customer development / business model development / lean startup techniques of people like Steve Blank, Alexander Osterwalder, Eric Ries, and many others – all of which depend upon building something and then using that to test product / market fit and business model validity.  The bias toward building something gets kicked up a notch in startup incubators like Y-Combinator and TechStars, where from day one the clock is ticking toward a Demo Day deadline.

Work Ethic Enhances Creativity

Chuck Close continued by saying …

“And the belief that things will grow out of the activity itself and that you will — through work — bump into other possibilities and kick open other doors that you would never have dreamt of if you were just sitting around looking for a great ‘art idea.’”

An initial hunch or bit of creativity may get you started, but it is not sufficient for a robust, deeply valuable product (or work of art).  First of all, you (the entrepreneur) simply do not know everything there is to know about the market.  You have to listen to others who use products in different ways than you, have different needs or wants than you, have different experience levels than you, and so forth.  When you hear a entrepreneur who does know it all, be very afraid. The more people in the market with whom you engage, the more you learn – and the more opportunity you’ll find to understand needs both widely and deeply or crash multiple good ideas together.

When I worked with Ron Sears doing innovation consulting, we would spend anywhere from weeks to months of up front research engaging and listening to a cross section of stakeholders to a product or business before starting ideation or design work.  My experience taught me that intense customer / stakeholder engagement always produces the sorts of insights that drive huge value into the product.

Sometimes Less is More

Building will not only uncover possibilities and open doors, but will also help you shut doors.  The best way to see if an idea will fail is to try it.  This is as true for art as it is for entrepreneurship.

For an entrepreneur, continuing to beat the dead horse of a idea that has no market validation is a cardinal sin.  Customer development / lean startup techniques emphasize quickly moving away from concepts that have no validation, and finding what to throw away can be just as creative as finding what to keep.

Overall, Building Wins

Overall, for both artist and entrepreneur, what wins is action.  Building something.  Without building something you cannot either engage the market or see (hear, touch, taste, smell) the art.  You cannot learn how to bridge from one iteration to the next even-better possibility.  You cannot learn what the market doesn’t like – or what artistic elements just don’t work.

So, the lesson of the day comes from Chuck Close, via Maria Popova – just show up and get to work!

Rebuilding Founders after the Fire – Campaign Update

For the past five days, my friends have been contributing to an Indiegogo campaign to rebuild Founders.  Amazingly cool to see everyone participating to get the word out and contributing to the campaign.

Here’s another link below to the campaign and a status update on the funding progress.  As of this writing, we are 22% funded.  Another substantial contribution (6% itself) is coming in directly from someone whose corporate policies wouldn’t allow contribution through Indiegogo.  So, in only 5 days of a 30 day campaign, Founders friends have taken us nearly 30% to our goal.

Wow!  😀