(Note: This is the second installment of a multipart series on conducting customer interviews and discovering true migraine problems.  And check out the first article in the series.)

Ok, you’re on the bandwagon.  You understand that you need to a get to a new level when it comes to understanding your customers and finding their migraine problems. You need to understand them better than they know themselves.

Here’s the thing: When you go out to interview customers, they are probably going to LIE to you.

I’ve lost count of how many companies I’ve seen fail while insisting that everyone they’ve talked to loved their idea. They think they’ve conducted the customer interviews they needed, but they didn’t understand one of the most important rules to customer interviews:

People’s natural inclination is to lie during interviews

Think about the last time a friend told you about their “brilliant” new idea that you thought was really dumb. Were you 100 percent honest with your friend? I bet you weren’t. You, and most people, would probably lie a little bit to get out of the awkward situation. It’s a lot like that for your customers. Their natural inclination is not to be completely honest with you during an interview. They want to figure out the answer you’re looking for and give you that answer so they can leave the conversation as soon as possible. Customers don’t lie to be malicious; it’s just the opposite.

Here are three main reasons customers will lie to you:

1.   They want to spare your feelings

They can clearly see how passionate you are about an idea, and they don’t want to be the one person to hurt your feelings.

When I was pregnant with my son and trying to decide on names, I conducted a fun experiment. I wanted to see what people really thought of the names my husband and I were considering, so when someone asked me what I was naming my son, I would give one of two responses. To one group, I said I wasn’t really sure, but I liked names like Branch, Major and True. To the other group I would say I was naming my son True, and that I was really excited about it. I quickly found that the two groups reacted very differently to my responses. When I told people I was still deciding, more than 90 percent would tell me they didn’t like any of the names I had picked. But when I acted excited about one name, over 90 percent of people told me they loved the name True and would go on and on about how unique it was. Obviously I wasn’t hearing the truth from everyone.

With my son’s name, I was just conducting an experiment. I didn’t really care what people thought. But, when you’re talking about starting a company, hearing the truth from customers is vital to your success. The problem is, if they can sense the answer you are hoping for, they will jump to give it to you.

2. They want to get out of the conversation

The key to understanding your customers real pain and current ways of solving existing problems is to get them talking.  You want to ask them open-ended questions that will elicit a lot more valuable details than the response to the specific question.  (More on open ended questions coming soon – make sure you are subscribed to get the article)

Now, think about the last time you got a call from a telemarketer trying to solicit a donation or get you to respond to a survey.  I bet with every question they asked, you went through a mental Rolodex of responses that might make the call end as soon as possible. You weren’t thinking of the real answers to their questions, let alone additional information they might find useful.  You were feeling uncomfortable and willing to say anything just to get it to end.

Most customer interviews are the same.  If you don’t do a good job of getting them comfortable and engaged before starting to ask them questions, they will just be looking for the fastest way to exit the conversation, and usually that means saying something like “That sounds awesome, I would probably buy that.”  They know that if they disagree with anything you said that you’ll want to argue with them, so they know that by agreeing with you and telling you how great your idea is, you’ll have no option but to end the conversation and go finish building your new product.

3. They want to seem smart

Many times when you present your idea, you’ll outline all the different ways it can benefit their lives, putting your potential customer in a situation where they look dumb if they disagree with you. For instance, you can tell them all of the money they are wasting each year from poor insulation in their home and all the benefits your product could provide to solve it for them.  What could they say?  “I don’t really care about all that money I’m wasting.” Or “I don’t really care about the environment.” Instead, they would likely try to save face by telling you how interesting it sounds and how they will think about buying your product.  They aren’t going to.  They just don’t want to look dumb, uncaring, or uninformed.

You have to trick people into telling the truth

Once you know that your customers are inclined to lie to you, your whole strategy should change. Your objective should be to trick them into telling you the truth, and to make it hard for them to lie by keeping them in the dark about what you’re really after. It’s the difference between asking someone’s opinion on a few ideas you’re considering and asking their opinion on one idea in which you obviously have a vested interest.

Interviewing customers is one of the most difficult steps in the entrepreneurial process. It’s not as exciting as launching a website or raising money. The truth can hurt too, especially if customers don’t end up liking your big idea. But, the only thing worse than not talking to customers is talking to customers who you don’t realize are lying to you.

No innovator fails because they couldn’t build their product.  They fail because no one found value in what they built.

Here’s what usually happens when someone gets a new idea:

  1. Their mind starts racing with all the possibilities of what it could turn into, the impact it could have on the world, and all the money it could generate.
  2. Next, they begin executing on their idea.  All of their focus is internal, working hard to come in on time and on budget.  They need to make this product amazing. First impressions are everything!
  3. Then, they work on marketing.  The product needs a catchy name and logo.  It needs beautiful collateral both online and offline. This has to look innovative!
  4. Finally, they take the product to market and, more often than not, get an extremely lukewarm reception.  So they blame marketing, and they blame the product for not having enough features.  Sometimes they bring new members onto the team and start the cycle from scratch.  Sometimes they just run out of resources and the project gets mothballed.

Sadly, this is the typical cycle of innovation.  Most new initiatives fail.

But successful innovators know that they have a very powerful tool at their disposal to significantly decrease the risk of innovation: experimentation.

Experiments are small bets that you make to see if what you believe to be true is actually true - to see if your predictions about the customer and the market are right.   It’s something small that you do today to prove that you are spending time and money on the right things . . . on building something that people will buy.

In All in Startup, the reader meets Owen after he has followed the very process outlined above and wasted hundreds of thousands of dollars and a year of his life building something that wasn’t meeting any of his projections.  What could he have done before he committed his available resources to executing his plan, to make sure customers would be waiting for him when the product was ready?  He should have run some experiments!

But the hardest thing about experiments is running them correctly.

Here are some guidelines about what a good experiment looks like.

To run a good experiment, you need to determine and document these five elements before you begin:

1. The Goal

What is it that you’re trying to learn? Or what are you trying to prove? What are the riskiest assumptions you’ve made about your idea? For Owen, his riskiest assumption was that people would buy half-priced, used bicycles online.

2. The Hypothesis

Your high school science classes taught you what you need to know for this part. This is a statement that you’re trying to prove true or false through the experiment.  The result will be a “yes” or a “no” so you need to phrase your hypothesis appropriately.

For example, a good hypothesis would be based on this setup: “If I do this action, then this outcome will happen.”

The key is to make sure that your Hypothesis helps you get closer to the Goal you outlined above and reduce the risk of your riskiest assumption. The hypothesis can help you test whether you have identified the right customer segment, whether your target customers actually have the pain point you think they do, whether they perceive enough value in your solution to buy it, whether your solution actually solves their pain point, whether you’ve identified the right channels to target your customers, whether your supplier cost estimates are accurate, whether you’ve chosen the right price point for your product, etc.

The biggest mistakes in putting together a hypothesis include 1) Creating a hypothesis that isn’t measurable and lacks a clear beginning and end (ex. “People want to eat healthier”); 2) Creating a hypothesis that isn’t about a specific group of customers (ex. Everyone wants a car that gets at least 30mpg); 3) Creating a hypothesis that doesn’t help you reach your goal (ex. “If I send this survey to 100 people, 10% will fill it out”); or 4) Creating a hypothesis that isn’t refutable, meaning that it’s difficult or impossible to prove it false (ex. “Restaurants want more customers”).

Some example hypotheses Owen could have created:

“If I put up a landing page to sell half-priced, used bicycles, then 5% or more of the website visitors will preorder the bikes.” – Testing value

“If I set up a booth at a bike race for one day, I will sell at least 10 bicycles” – Testing customer segment

“If I spend $500 on facebook ads targeting people with cycling listed as an interest, at least 5 people will click on the buy button and enter their payment information” – Testing customer segment and marketing channel

“If I call 20 bike shop owners, at least 3 will come to my shop for a one-hour meeting to find out more about my bikes and whether they want to sell them in their store” – Testing distribution channel.

3. The Subject

Who are you targeting with the experiment?  How are you filtering who will participate and who won't? For instance, if Owen puts up a landing page to see if people interested in road bikes will want to buy his bikes, what kind of information is he gathering on the landing page to make sure that the right people are seeing his messaging before he decides whether it's working or not?

Tip: If you are having trouble limiting your target subject for the experiment, try first listing out people who wouldn't fit into your target subject. I.e., for Owen it's people who want to buy a $100 bicycle at Walmart or Target or perhaps people who are interested in roadbikes but have never actually purchased one because they think they are too expensive.

4. The Logistics

How are you going to conduct your experiment? What’s the time period? How do we know when the experiment has started and has finished? How many people will you target? Who will carry out the experiment?

A key question to ask yourself here is: is this the least amount of time and effort I can spend to test this hypothesis? Remember, this is supposed to be a small bet you can afford to lose.  Too many people think their experiment is building a lighter version of the final product – taking 6 months to put together.

You should be able to run your experiment in under 2 weeks.  I will frequently push my innovators to come up with a hypothesis and figure out a way to start the experiment within 24 hours.

5. The Currency

Something of value that the subjects of your experiment have to give you in order to prove whether your hypothesis is true.

The key is that it be something painful for them to give up in order to demonstrate their sincerity.  This can include anything from money to time to a commitment of certain resources.  Basically anything that demonstrates customers will be willing to part with something they value in order to obtain the product or service you’re offering. You want to make sure that they aren’t just trying to be nice to you or lying about their intent for some other reason.

When you are trying to de-risk an idea, the worst kind of evidence you could gather is a false positive (i.e., perceived interest from people who don’t actually see value in your product) because it gets you excited about moving forward and going All In on the idea. Simulate a world where your product already exists, and see if your customers will give you the currency you think you deserve.

In the Owen hypothesis examples above, Owen is asking for specific actions, a commitment of money or commitment of time to demonstrate whether he’s identified the right customer segments, marketing channels and distribution channels.

6. The Success and Failure Criteria

Before you begin your experiment, it’s important to define what success and failure will look like.  If success is having 25 percent of customers give you currency, what does it mean when only 15 percent provide it? Has your experiment failed?

You need to set up these parameters before you begin the experiment, so that you’ll objectively understand the outcome and not be forced to debate what the results mean with your team.

Additionally, a friend of mine, Justin Wilcox, suggests that innovators write out two separate plans of action to pursue depending on whether the experiment reveals the hypothesis to be correct or incorrect. He emphasizes that this should be done before conducting the experiment.  Some people have such a hard time deciding what to do if an experiment doesn’t go as they had planned that they end up making up a justification of why it was a success and allowing themselves to keep moving forward on their idea.
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OK.  Those are the elements you need to determine and document before you begin your experiment.  And while this experiment framework can seem cumbersome, remember, it is your single greatest asset in reducing the risk that goes with creating something new.

Corporate innovation is all the rage these days. With plenty of money and time at their disposal, employees have ample resources to create the next big thing. But before they commit too many resources to an idea, these intrapreneurs can learn a lot from successful entrepreneurs who operate with fewer resources.

Innovation within a corporation comes down to two factors:
1.     How employees generate ideas
2.     How employees determine which ideas to pursue

1. How employees generate ideas (problem-oriented vs. solution-oriented ideas)
Do you remember the Segway? The Segway is a two-wheeled, battery-powered machine that makes even the most popular kid in school look like he sits alone at lunch.  What I’m saying is you look dorky riding the thing.  There’s something about you not putting in much effort while standing and gliding down the street that just makes people uncomfortable.

When the Segway first came out, it garnered lots of attention. Steve Jobs predicted the Segway would be bigger than the PC. John Doerr, a prominent venture capitalist who backed Netscape and Amazon, said it would be bigger than the Internet. With this level of hype, the company raised more than $90 million. But it’s grand unveiling was a huge disappointment. It took the company its entire first year in business to sell the number of Segways it predicted it would sell every two weeks.

The company had generated a solution-based idea. The Segway was a shiny, new technological advancement…that nobody wanted. The product didn’t solve a problem for the customer. Most companies that are unhappy with the results of their innovation programs are generating these same kinds of solution-based ideas. They start with a technological advancement or a brain storming session that produce a product, and then they try to figure out who might want it.

They’re so excited to have created something new that they forget that no one necessarily asked them to create it in the first place. They just assume that if they build it, the customers will come. Unfortunately, that seldom happens.  What innovative employees – or intrapreneurs – do differently is come up with solutions inspired by their customers’ problems.

Instead of taking stabs in the dark and guessing what people might like, why not go directly to your customer and figure out for sure? When Paul Buchheit at Google created Gmail, he did just that.  He came up with a problem-based idea. Instead of modeling his email platform after others on the market (looking at competitors to see what features and benefits to include), Paul listed out all the problems he thought the existing solutions created for users.  The existing email platforms had limited storage space, were hard to search through and were slow to load data. By designing Gmail around these problems, Paul created something that generated a lot of value to email users.  He initially designed the gmail platform for his own use, but when others in the company saw it, they begged him to let them have access to the functionality he created.  And when Gmail became public, users flocked to the service because word of mouth marketing was so powerful at explaining its value.

Word of mouth marketing only works when people feel compelled to spread the word – and that compulsion is borne out of feeling that a product has solved a tangible problem. Gmail wasn’t just different to be different.  It was different in a way that generated a lot of value for its customers. So much value that they wanted to tell people about it at school or work.

Like Gmail, most successful products are built to solve problems. These problem-based ideas can only be found through customer interaction. You know you have a potentially great idea when you identify a group of customers who are ready, willing and accessible. Ready customers have identified a problem and are interested in fixing it, willing customers have taken steps to fix the problem in the past and have a budget to address the problem, and accessible customers are people you can easily reach. When you seek out this trifecta of customer interest for a problem-based idea, your product will practically sell itself.

2. How employees determine which ideas to pursue 
Webvan is one of the most famous examples of a seemingly good idea that flopped. In 1996, Webvan launched an online grocery delivery business on the theory that people would pay money to avoid the hassle of grocery stores. Webvan spent hundreds of millions of dollarsbuilding an infrastructure (warehouses, technology, sales/marketing) based on a business plan that should have worked. But it never took off, and eventually the company went bankrupt in 2001. The online news site CNET went on to name Webvan the worst dot-com failure in history.

The Webvan story follows a plan-based approach to business that is commonly taught in business school. You write a business plan, see whether the numbers add up, and predict the success of a business based on this creative writing exercise. The plan-based approach seldom works because innovation is iterative. Your first business plan won’t be perfect, but most people don’t give themselves enough resources to make necessary pivots. Instead, many companies spend all their money to build a perfect product that is often a failure.

Entrepreneurs with the most positive results, however, know their company will be a success before their product ever hits the shelves. Instead of trying to predict the future, these entrepreneurs try to play detective by using an evidence-based approach to innovation. Theevidence-based approach determines customer demand and value of a product through experiments with actual customers. Simply by using this approach, the creators of Webvan could have launched a successful company or, at worst, abandoned the idea and saved hundreds of millions of dollars.

Zappos, an online shoe retailer founded in 1999, is the opposite of Webvan. Before the company spent a dime on building its infrastructure, it made sure it had customers by verifying a willingness among customers to buy shoes online. In the beginning, founder Nick Swinmurn would take pictures of the shoes available at local stores and post them on Zappos’s website. After a customer made a purchase online, Nick would return to the local store, buy the pair of shoes at full price and ship the shoes out manually. Before Zappos had built a single shipping warehouse, it was able to prove that its business model would work. This evidence-based approach is what prevented Zappos from becoming Webvan.

A few years after Webvan closed its doors, Zappos was acquired by Amazon for $1.2Billion. Swinmurn’s early experiments, while time consuming, obviously paid off. It’s important to verify that customers will actually pay for your product. A customer can easily give you an email address or a verbal agreement to buy your product, but real “currency” is different. When a customer gives you something that pains them, like money, time or an endorsement, you have strong evidence that your product is highly valued.

With everything on the line, entrepreneurs with access to little capital are under heightened pressure to build a moneymaking product on the first try. The best entrepreneurs reduce risk and expense by generating ideas that solve a problem and verifying those ideas with customer-backed evidence. This approach is often used out of necessity by entrepreneurs, but successful employee-driven innovations result from mimicking this method within the corporate environment. A problem-based idea and evidence-based approach is essential for innovation anywhere. Whether you have one employee or 5,000, the pain of innovation can be both eased and energized by following the example of successful entrepreneurs.

Launching new products and services is the only way to stay competitive in the new economy. Unfortunately, most companies have a process in place that stifles innovation.

I recently gave a TEDx talk titled "Our Approach to Innovation is Dead Wrong" about why our traditional thinking with regard to launching new products or initiatives is actually killing those new ideas before they ever have a chance to succeed.

So how does your organization stack up?  

What's working well and what do you think isn't working?

Looking forward to your thoughts.

A few weeks ago, at the National Association of Community College Entrepreneurship (NACCE) Conference, I took part in a panel discussion on the subject of preparing our future workforce for entrepreneurial thinking.

As companies increasingly express an interest in creative, innovative employees, one of the hottest questions in entrepreneurship education has become, “How do we prepare graduates to solve real problems and find opportunities for their employer rather than just show up to a job?”

The first question I received on the panel was “how are we doing as a community of entrepreneurship educators in preparing this future workforce?”

I was quiet for a few seconds. Frankly, I was nervous about what would happen if I said the first thing that came to my mind. I prepared myself to get booed off the stage and said, “I think we’re doing a terrible job. In fact, I think that we are actually killing innovative and entrepreneurial thinking through the classes that we teach.”

They didn’t erupt in boos. They let me continue.

1. Students are pitching to professors, not customers.

In many entrepreneurship classrooms, professors make judgment calls about good ideas and bad ideas. Sometimes students pitch their ideas in business plan competitions to panels of experts that decide the value of a potential company. In the real world, logic and expertise can’t predict customer behavior. Even the top professional startup investors are wrong about predicting which startups will be successful 90% of the time. The only way to create a successful company is to discover what customers actually want through direct interactions, not assumptions. Instead of making judgments, we should push students to interact with potential customers and conduct experiments to see if they can simulate sales. If a student is required to appease an internal source of authority, like a professor, for the sake of their grade, then they won’t learn to respect the true source of authority, the customer.

2. Classroom work isn’t giving students butterflies in their stomachs.

Creating a successful company is not as simple as checking things off a to-do list. Yet many professors still give students a list of tasks—create a business plan, interview an entrepreneur, read a book—as if there is an easy roadmap to building a million dollar company. Entrepreneurship is an emotional roller coaster. It’s scary and exciting all at the same time, and, above all else, it’s fraught with uncertainty. If teachers aren’t giving students butterflies in their stomachs – making them feel overwhelmed or uncomfortable – then they aren’t preparing students for the challenges of entrepreneurship. And they certainly aren’t teaching them to develop entrepreneurial thinking. Instead, teachers who don’t push students out of their comfort zone are simply reinforcing traditional 9 to 5 employee thinking. There’s nothing wrong with a 9 to 5 employee, but it’s not the mindset companies are currently looking for as they interview business school graduates.

If you want to give your students real butterflies, then give them an objective and ask them to figure out how to achieve it. Better yet, send them out on some real experiential activities, like the activities suggested in this curriculum. There is no doubt that uncertainty in a classroom makes students uncomfortable. They like having tasks that make it easy for them to walk the road to success. But, if we keep teaching students entrepreneurship that only works in a classroom, and not in the real world, we aren’t doing them any favors. In fact, we’re setting them up to fail themselves and their employer.

It is our responsibility to push students to fight through difficulty and uncertainty. If your students are uncomfortable, that’s a good thing. When they enter into the workforce, they will be armed with an entrepreneurial mindset, arguably the most important key to success in business over the next 20 years. The great thing about the attendees of the NACCE conference is that most of them already know these two potential barriers to the cultivation of innovative thinking. Many of the educators there were some of the most forward thinking teachers I have met, focused on continuously improving their game and the value they were delivering to students. But classrooms that reflect that understanding remain a small minority. There are still far too many classes making these two big mistakes. Fortunately, I didn’t get booed off stage. Many of the educators in the room shared with me the awesome activities they do with their students to give them those butterflies. I’d love to hear more of your examples. How do you create uncertainty for your students or your employees to encourage entrepreneurial thinking? How do you give them butterflies in their stomachs and inspire them to solve problems?

Ready to join the curious community?
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