The Startup Owner’s Manual

My book of this week is The Startup Owner’s Manual: the Step-by-Step Guide for Building a Great Company, by Steve Blank and Bob Dorf.

Thanks to Jim Terranova for recommending this book to me. Jim has been an awesome mentor, not only for his generosity of sharing his own vast knowledge about the startup world, but also for bringing the tremendous expertise of his network to me. Two and half hours every week with Jim and his guest is the most exciting way to spend an evening. I am grateful for the opportunities of learning from these great people in Silicon Valley, and the books coauthored by serial entrepreneurs such as Steve Blank.

I always love reading the Acknowledgment chapter of a book. It often tells me a lot about how a piece of work comes to its fruition. I found it fascinating to trace that “how did she/he come to write/do this” beyond the “what has she/he done or written” covered by the book. In the acknowledgement of this book, Steve wrote “As an entrepreneur in my 20s and 30s, I was lucky to have four extraordinary mentors, each brilliant in his field: Ben Wegbreit, who taught me how to think; Gordon Bell, who taught me what to think about; Rob Van Naarden, who taught me how to think about customers; and Allen Michels, who taught me how to turn thinking into direct, immediate and outrageous action.” These four axes underscored by me are great baits for thought.

This book is a how-to reference for aspiring entrepreneurs. Much of the book focuses on the customer development with the help of a business model canvas. This book recognizes that the process to get, keep and grow customers is different for web/mobile startups compared with startups that sell products through physical distribution channels. It provides step-by-step guidance for both types of startup.

The authors advise to not read too much of this book at a time. Unfortunately, I have to ignore this advice as my one-book-a-week project clearly requires me to read it within a week. However, the implicit message is to refer to this book often in the process of doing a startup. I got this point and agree with that this book would be a great companion for the entrepreneurial  journey. I would not go as far as the authors wished for: “your best friend – for the six to 30 months or more that it often takes to begin building a successful, scalable startup business.” No, I prefer real human beings as my best friends. Grammatically correct or not, “best friends” is prefered over “best friend” regardless.

Having not read Steve Blank’s other books, I think one great contribution this book made is the customer development methodology. It is crystallized into a Customer Development Manifesto detailing fourteen principles to guide the process. Two other main focuses of the book are customer discovery and customer validation. I like how the authors explain the two stages: Customer Discovery turns the founders vision into a business model canvas and then into a series of hypotheses. Those hypotheses are turned into experiments, and tested with customers to see if your understanding of the customer problem and proposed solution mesh. Customer Validation expands the scope of the business model testing to see if you can get enough orders or users to prove that you have a repeatable and scalable business model.

The series of checklists provided in this book are very comprehensive. These checklists are meant to help with tracking the progress of the customer development process. The multi-level indentation used in these checklists and the diagrams throughout the book make it very irritating to read on a Kindle. Do not read the e-version. Get a paper copy.

Many passages I highlighted while reading this book are great source of information and advice. With limited time and space, the rest of this post will share with you the Customer Development Manifesto from the book.

  1. There are no facts inside your building, so get outside.

It’s much easier to write code, build hardware, have meetings and write reports than it is to find and listen to potential customers. But that’s what separates the winners from the losers.

  1. Pair customer development with agile development.

Customer development is useless unless the product development organisation can iterate the product with speed and agility.

  1. Failure is an integral part of the search.

One of the key differences between a startup and an existing company is the one that’s never explicitly stated: startups go from failure to failure….If you are afraid to fail in a startup, you’re destined to do so….When something is not working, successful founders orient themselves to the new facts, decide what needs fixing, and act decisively.

  1. Make continuous iterations and pivots.

The best startup founders donot hesitate to make the change. They admit when hypotheses are wrong and adapt.

  1. No business plan survives first contact with customers so use a business model canvas

The difference between a static business plan and a dynamic model could well be the difference between flameout and success.

  1. Design experiments and test to validate your hypothesis.
  2. Agree on market type. It changes everything.

The product/market relationships generally fit one of these descriptions: bring a new product into an existing market; bring a new product into a new market; bring a new product into an existing market and trying to re-segment that market either as a low-cost entrant or as a niche entrant; clone a business model that’s successful in another country….Market type influences everything a company does. Strategy and tactics that work for one market type seldom work for another.

  1. Startup metrics differ from those in existing companies.

Startup metrics should focus on tracking the startup’s progress converting guesses and hypotheses into incontrovertible facts rather than measuring the execution of a static plan. It’s critical that board and management continuously test and measure each hypothesis until the entire business model is worth scaling into a company.

  1. Fast decision-making, cycle time, speed and tempo.
  2. It is all about passion.

The people leading almost every successful startup in history…their brains are wired for chaos, uncertainty, and blinding speed. They are irrationally focused on customer needs and delivering great products. Their job is their life. It is not 9-to-5, it is 24/7.

  1. Startup job titles are very different a large company’s.

Startups need the rare breed: open to learning and discovery – highly curious, inquisitive, and creative; eager to search for a repeatable and scalable business model; agile enough to deal with daily change and operating “without a map”; readily able to wear multiple hats, often on the same day; comfortable celebrating failure when it leads to learning and iteration.

  1. Preserve all cash until needed. Then spend.

Search not for the one-off revenue hits but rather for a pattern that can be replicated by a sales organisation selling off a price list or by customers regularly visiting the website.

  1. Communicate and share learning.

Share everything learned outside the building with employees, co-founders and even investors.

  1. Customer development success begins with buy-in.

Everyone must accept the (customer development) process, recognizing that this is a fluid, nonlinear search for a business model that can sometimes last for years….To succeed at Customer Development, the company must abandon the old model’s emphasis on execution of a fantasy business plan. Instead it must commit to a Customer Development process stressing learning, discovery, failure, and iteration in the search for a successful business model.

By reading these quoted passages, you have probably noticed that the tone of the book might have been a bit too forceful. It shows the authors’ conviction about the content presented in this book. As a reader, if you are sensitive to a “lecturing” style, I would suggest you to read beyond that. The wealth of information and advice in the book is worthy of my time invested in reading it. It is a great go-to book even though it would not be a best friend for me.