Bob Dorf: How to work on a startup

Bob Dorf is a well-known entrepreneur (he brought 8 companies to IPO), a consultant and mentor of Startup Academy, who started his career in business when he was 12 years old. Today, he is a welcome participant in many conferences, because, like no one else, he knows how to create successful startups properly, stand firmly with them and turn them into big companies.

Recently, Bob Dorf spoke at the conference Business of Software 2012 where he spoke about the basic principles of life of a "healthy" startup. To your attention are the main points of his speech which I sincerely believe in and try daily to use:

Why do most startups fail?

• Most modern startups cannot be scaled, they fall apart due to the lack of a large number of loyal users and customers who are passionate about the product.
• Writing code is only half the job. Today, technology allows you to create almost everything that imagination is capable of, so the first place is the ability to determine the exact portrait of a potential client, as well as find it in the mass and “fall in love” with your product.
• If you are passionate about your idea, then after 20,000 hours of hard work, you will get 1 chance out of 8 to succeed. The only way.
• Each team needs 3 people: “hacker”, “businessman” and “creator”. Every morning, a “hacker” and a “businessman” should hold a mini-meeting. After discussing the key issues, the “hacker” should devote himself to the creation of the product, and the “businessman” should search for the ideal client.
• Half a century ago, the company's success depended on how the entrepreneur overcame obstacles, on the process. But times have changed.
• Most startups "die" because they think that:
  A) know your buyer
  B) know your product
  
• The founders perceive everything as a linear process: “concept — prototype — testing — launch,” and they make many mistakes.

A business plan is the enemy of startup number 1.

The business plan is related to the creation of creative texts, but not to the development of this business.


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Don't stop asking yourself: “What can I change to make a product better?” Always try to get feedback from users and customers.

Test your business model! Any, even the most elegantly written, business plan will not withstand any criticism at the first meeting with a real client. The Webvan example is very instructive.

What is a startup for me? This is a gang of pirates who get together from time to time to combine pieces of the "map" and see if they are moving in the right direction. Always be able to search. Only after a detailed analysis can you understand your “business plan”, based only on bare facts. There is no such “documentary” concept of a “start-up with 8 years”, there are real “several years of ups and downs”.
A startup needs a plan of action, rather than a business plan. In this sense , Alexander Ostervalder’s “Outline of the Business Model” is perfect. It has 9 components (main blocks of questions), the most important of which are:

• Benefits offered - What problem do we solve?
• Consumer segments - for whom we solve it?
• Customer Relations - Where do we find them, how do we make them loyal, and how do we increase their number?
• Revenue Flows - What do we earn?

Consumer segments should be as clearly defined as possible. Successful relationships with customers are the constant fulfillment of their obligations to them, the justification of their expectations.

Create a business model with multiple partners. When you're done, you will get a product that meets the needs of the market. But your outline is only 9 well-thought-out assumptions! How to turn assumptions into facts? That's right: go to your potential customers and ask them! That is how literate customer relationships are built.

Customer relationship

Customer relations is the process of setting the criteria for an “ideal” customer, their rationale and approval, product adaptation, customer search and, finally, building a company around their needs. The first three stages are the classic “search” stage in the company's development process. The turning point and the key moment, as a rule, arises just at the “search” stage. The process of finding and building a company is already a “action” stage.

“Search” is the defining stage. How to implement your plans correctly, you will be taught in any decent business school. And only in the process of searching, you yourself should choose those of your assumptions that, in your opinion, are correct.

Prototype / pilot sample

The whole search process begins with the creation of a prototype. Create a product with a minimum set of features, a test sample for new ideas.

If you want users to start interacting with your product, create a “toy” for them as soon as possible! Even if it does not work to the end: users' reaction to the prototype is many times more valuable than their reaction to your words about the imminent launch of the ideal product. After all, their feedback invaluably helps to improve the product itself!

Diapers.com is a prime example of prototype value. The creators launched a website and began to take orders for diapers even as long as they actually had them available. Entrepreneurs just wanted to check whether their idea is worth further developing it. As a result, they spent a lot of time buying diapers all over the city and delivering them from other parts of the country. The number of orders grew, and the project already needed a truck to carry orders. The founders were losing money in the process, but they did not set themselves a goal in the form of self-sufficiency. They just checked the selected business model. The benefits offered are what they have taken as the basis for communicating with customers.

Reduced sales - only a small price for the information you receive during the testing process.

The prototype is your primary communication tool with the client. The faster you create it, the faster you will get answers to the questions:

Is it all so bad?
What qualities allow our competitors to meet your needs?
What can make our product better?

A turning point

Pivot is the essence of customer relations. Pivot is an iteration between creating a portrait of a client and his search. “U-turn” is always rapid, but it opens up new opportunities.

Change only if 20-40 of your customers say that something is wrong. Do not pay attention to one-time complaints

If you make any changes, go back to the business model assessment, then go back to your customers and find out if the situation has become better. The process of product adaptation cannot be postponed, it cannot be avoided. As a product creator, you MUST go through it!

Usually, changes in the process of product adaptation in large companies lead to the dismissal of employees. In a startup, this process is a “holiday” because it helps to modify the product, which will attract even more customers.

The main problem here is hasty decisions. Make sure you collected enough feedback to make changes? 3 people said about your product is bad, and you are in a hurry to change something? Take your time: find a dozen more similar opinions before making fateful decisions.

The faster you change, the less money you lose: a pivot is a time bomb.

How to stop in time?

In fact, in the process of creating a product there is no end point, but you can always slow down the modifications when you understand who your client is and how he uses the product to meet his needs.

The outline of a business model is your benchmark, a map of your business, and the road to your customer.

Make sure that all your assumptions are tested on the client - it is test runs that are central to determining the degree of readiness of the product.

And remember: the most important customer is an enthusiastic customer, because he, like you and your investor, wants to bring your product to perfection.