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Progression of Idea Validation

Having 100 million users and a billion in revenue is a pretty good validation of an idea. However, Rome was not built in a day. Validating an idea and the subsequent products/ startups is best done in stages.
The progression:
  • Idea – Validating an idea requires initial feedback and feel amongst a select group of potential buyers. This can be done via surveys either in small verbal groups or large online surveys. This can also be through the first 10-20 customers where many may be friendlies.
  • Product/ Service – This is the long sought-after “product-market” fit stage where validation comes from the first cohorts of buyers – scaling from 20 to 100 inorganic customers. Depending on the product/ service, engagement metrics may also provide validation.
  • Company – Let’s call this stage the growth stage for a company. At this stage, validation comes from lower customer churn. In many cases, competition will be fiercer here, so churn could be a problem.
  • Category/ Market – There are clear market leaders with more niche players taking the smaller 20% of the market. (Follow the 80-20 rule.)
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Value Is Fundamental to Driving Traction

Ash Mauryarecently wrote in Entrepreneur an article titled “Traction Is What Investors Are Looking for When You Present Your Plan”. Ash writes that investors are looking for traction, above all other criteria like market opportunity and competitive advantage.
Ash’s definition of traction is:

rate at which a business model captures monetizable value from its users

Before Ash describes the definition of traction, he shares his thoughts on value…
  • Created value > captured value. That is, the value a customer receives is greater than the value the company receives (the customer pays).
  • Captured value ≥ cost (delivering solution). This is simplistically understanding revenue is greater than (or equal to) cost.
  • Created value ≥≥ cost.

This is a pretty simple to understand. For companies looking for investment (well, any company looking to be successful), it’s important to understand traction and all the drivers thereof. As an early-stage startup wiggles and fights its way towards product-market fit (or service-market fit), traction will likely be near-flat. But as the company reaches product-market fit, that traction curve starts to climb fast. Here, focus turns towards customer acquisition, and thus, the sales and marketing machine commences.

Understanding what traction is is important, and just as important is understanding the real value you are creating for your consumers. If you can help your consumers capture great value, then can you start to build traction. Value àtraction. Value does not = traction. That requires some marketing and sales, but value is fundamental.

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Yeah, Sales Before Product-Market Fit is Hard

So you’ve built an MVP of a product. You’ve hit the ground selling. You’ve gone door-to-door (probably more figuratively, but possible you’re actually doing this). You’ve met with 100 prospects, and of those 100, you got… 0 customers. Ouch.
One of the greatest problems in the startup world is selling a product before product-market fit. I know from personal experience with Body Boss how we launched with a product that was overbuilt with features that weren’t needed by our market while missing features that were critical. Sales was very hard.
Within our true 16 months of running, we had signed up 12 customers… the average receipt of the customers in the first eight months was $214 while the average receipt of the customers acquired in our last eight months was $458.
Meanwhile, our retention and user engagement numbers of our latter batch customers were several times greater than the former. This reflected many things beyond marketing… namely, our improvement in the product inching towards product-market fit.
As I look back at our sales processes while building a product from the ground up in an industry none of us cofounders had any experience in, I can point to several lessons that could have helped mitigate our difficult sales situation…
  • Have first-hand experience in the market you’re trying to address. You can develop empathy easier, you may have a network of like peers, etc.
  • Absent first-hand experience, be a sponge and do a lot of customer discovery to explore the problem and present your idea of the solution to get buy-in
  • Selling on the dream is hard. Instead, sell on the primary value and benefit you’re providing with your MVP. You can share the dream, but sell hard on what you do provide
  • Focus on the problem you’re solving and the benefit you’re delivering. Don’t try to jam-pack more features that deliver incremental benefit. Focus on what delivers the most benefit in the shortest amount of time so customers get it
  • Launch, learn, iterate, repeat as fast as you can as long as you have sufficient “gut-feeling” on how the current approach is going
  • Customer discovery up front (early and often) mitigates significant cascading risks down the line
Most people in sales at startups will stress how sales is hard. Why? Because absent of product-market fit, the product just doesn’t address the market in a simple, scalable way. Meanwhile, you have significant friction in showcasing how your product can (assuming you can) deliver inertia-breaking benefits.
So yeah, sales before product-market fit is hard. 
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We Built an Awesome Feature No One Ever Got Use

I wish we had tracked user engagement better with Body Boss; though, I knew where coaches were getting stuck and why they weren’t experiencing the value of what we built. I have a list of 85 schools who trialed Body Boss within 14 months, but only converted 16%. To boost conversion, we added features… Whoops!
We built several features that did lead to conversions and got us closer to product-market fit. That is, we built critical workout features that coaches needed. However, we also added features that didn’t lead to conversions like Pods – ability to track multiple player workouts with a single device vs. a one player, one device before. Coaches were really impressed with Pods and it led to several trials, but not to conversions.

Body Boss Pods on the tablet and smartphone
Why didn’t Pods or other great features not lead to conversions? Simple – the coaches never got to the point to use Pods.
What we built and why we built, is what entrepreneur Joshua Porter calls the “Next Feature Fallacy” (see: The Next Feature Fallacy).
In retrospect, the major hurdle of user/ coach engagement was building a workout program. We had improved the experience several times since v1.0; however, most fixes were band aids, and didn’t solve the problem.
So to use the new Pods feature, coaches had to build a workout program. Except, if coaches were having issues building a workout program, then they never got to Pods. 
Instead of building new features like Pods (a nice-to-have), we should have focused our efforts on user experience and helping coaches get started with Body Boss. Once we got coaches using the system, we could then track engagement metrics and tested the adoption of features like Pods.
What else could we have done to address the engagement issue? How have you developed features that consistently added value?
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Without Product-Market Fit, Did We Quit Too Early?

Reflecting posthumously… Source: http://news.bbcimg.co.uk/media/images/64480000/jpg/_64480391_sunset_rocks.jpg
If the inner voice in you keeps telling you to go back or to keep forging ahead, should you? Should I?
I keep bringing up Body Boss recently because I feel it’s unfinished business. I feel like we quit too early. Or maybe I’m just really passionate about it still. Or maybe I still get messages from happy customer-partners who want to continue to do more. Or maybe I’m crazy and I’m blinded by the potential opportunities to see the actual lack of opportunity.
There’s a popular picture I’ve seen illustrating the cost of giving up too early:
Source: http://www.davidmcelroy.org/wp-content/uploads/2012/01/Three-feet-from-gold.jpg
For the myriad of lessons learned in 21 Rough Lessons Learned from Failure post, I still can’t shake that maybe we stopped building Body Boss too early for ONE major reason. In fact, Marc Andreessen shared the idea recently in “On product/market fit for startups“:

“My contention, in fact, is that they [startups] fail because they never get to product/market fit.” – Marc Andreessen

In the article, Marc was referring a lot to the market being the determining factor of startup success as the market can actually pull a product and team in the right direction. At least, that’s my simplified synopsis. However, this notion of failure before product-market fit is an incredibly resonating one.
In the 16 months following launch, we had over 70 unique schools/ programs trial Body Boss, and we had 12 paying customers with about 4 of those signing back up. Yes, these are paltry numbers. However, if you look at the data from interviews as to why they weren’t subscribing or why they didn’t re-subscribe there were very, very common reasons. The market was trying to pull us in the right direction. We just resisted.
In fact, 3 of the 4 re-subscribers were actually in months 10-14 when we started to build some of those features customers were asking for. (They re-subscribed after we announced the zombification of Body Boss, actually.) However, in the end, we made a collective decision to not pursue Body Boss as it stood.
“So what are you trying to say, Daryl?!” I’m saying this…
  • Capture data, and you can start to see a story. For us, it was poor product-market fit at the beginning which could be explained, largely, by a lot of hubris on our part (we thought we could be like Steve Jobs and tell coaches what they really wanted) and by poor customer discovery up front.
  • Speed kills… or rather, lack of speed. If I could, I would’ve funded the team so everyone could be full-time on Body Boss, and thus, no other distractions of full-time employment elsewhere. Without distractions, perhaps we could have churned out the right features and user experience [quicker] to reach closer and closer to product-market fit.
  • Have Empathy and Let the Currents Take You. As I mentioned above, there were many moments we, as a team, failed to listen to our customers. We naively believed we knew the better way to do things. We lacked empathy, and even though the market was trying to pull us in the right direction, we didn’t let it. When enough of the market tells you to move one way, you have to put aside your ideals for the greater good.
  • Failure/ quitting is always an option. I don’t want to say “quitting” is always a bad thing, because sometimes, it’s the right thing. Like I said before, I could be blinded by what I believe is there. That’s why having a great team is important, too… to not just say, “YES” to everything I say, but to challenge me.  
  • Regret is a damned thing that can haunt you, but you have to move on. The experience with Body Boss has taught me a great deal on startups, about building a team, and much more documented in the 21 Lessons Learned. However, in corporate settings, a failure is a failure. In startups, failure is called experience. Embracing the lessons learned will give me great hope for the future.

Of the 70 schools who signed up for trials, but didn’t convert, I’d say at least half of those would’ve subscribed had we nailed a few items down ranging from a rework on user interface to features. That’d give us about 40-45 customers in the first 18 months – not too bad. That’s my expected benefit. Conservatively, 20 schools would have converted – still not bad, and I’d venture to guess many more would re-subscribe, too.
However, features aren’t always going to win over customers, I know. That’s why I’m suggesting this based on my actual conversations. Perhaps designing for the users would also have helped move a low-tech industry to embrace more technology… or maybe we would’ve died anyways. There are a number of things we could’ve implemented, too, to help really mitigate against building the wrong product such as Letters of Intent, development alongside customers, a system by which customers/ prospects can request or reserve features almost like a Kickstarter (it’s in my head how this would work), etc.
I suppose that given we never reached product-market fit and looking at the data posthumously… I can’t help but wonder the WHAT IF. I ask myself whenever I finish a project or day if I killed it (in a good way). I don’t feel like we killed it for Body Boss. I think we could’ve done better… that’s a pretty bad feeling, but one that I have to learn from and move on. Right now, our competitors are making large headway in the market, and the opportunity has largely passed by to revive Body Boss and be the dominant player. Lack of speed kills.
For now, Body Boss will be one of those opportunities with great regrets and great learning moments to take to my next startup.
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