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July 15, 2012 / compassioninpolitics

What do most new entrepreneurs in B2B startups not understand or miss

Here are some common assumptions of first time entrepreneurs that put their businesses at risk:

• Not understanding the customer. Assuming too much about the customer. Not asking enough questions of customers.
• Assuming quicker growth than is possible.
• Assuming they are the customer.
• Not thinking in terms of feedback loops
• Not thinking in terms of systems theory & process
• Not asking enough questions of successful experienced entrepreneurs.
• Not understanding speed or trust
• Not understanding productivity, time, or leverage.
• Not understanding the power of cooperation.
• Not fundamentally understanding value (ie why people buy business services)
• Not understanding lifetime value of a customer.

In relation to online marketing:

• Overestimating the speed of search ranking
• Not understanding the importance of conversion
• Not understanding how to do conversion or work on a sales funnel
• Assuming Google traffic = more valuable than it is (ie you’re only going to convert X amount of that traffic–say 25 to 30% on the high end versus 75%)

———–

I assumed B2B start ups, because thats the area I understand the best. The client acquisition process seems clearer to me–also the sales transaction makes more sense. It provides a better feedback loop in my opinion. You build a relationship or you don’t. You sell a product or you don’t–and you can adjust based on the objections or the nonverbals or the direct feedback to questions around barriers and challenges from the person sitting across from you. You can then use a similar sales process online.

Feedback loop is a fancy name for data. Without data is hard to tell what is working and what is not. Its also difficult to tell what to prioritize. Data isn’t perfect, but often better than guessing.

Examples of feedback loops might be getting more user feedback (or more targeted user feedback on value, challenges, etc…). The better & quicker your feedback loop is–the better you can course correct. You can put that feedback info into an Excel or Google spreadsheet, whatever works best for you.

You can look at Demmings method of process improvement, experiential learning, or the lean startup methodology for an idea about both feedback loops and process improvement.

One way to think about process is just A to B to C in terms of a customer (aka your user acquisition process). You can also think about process in terms of their process (ie customers process’s overall) or in terms of the gaps in process in the market (ie where the client or customer is getting stuck).

Almost everything in business (which occurs regularly) should probably be understood as a process. And if important–should be subject to Kaizen improvement.

Marketing in startups is a process of relationship and trust building, which usually concludes with a sales offer at the end.

The issues of process gets into issues of quality, Six Sigma (which is quite complex), Theory of Constraints (by Eli Goldratt), and Demming (which I mentioned before). There are a couple others–but I believe those 3 cover much of the territory. It all goes back to Taylor, who improved the work on assembly lines. In terms of knowledge work & creative work the idea is a little different (ie more flexible for creativity to emerge). This gets back to the 80/20 principle–which helps provide a focus for where improvements should be made.

You can Google:
• Lean Startup (and Lean Customer Development)
• Lean Production (initially started at Toyota)
• Edward Demming (he’s famous for 16 points & for a process of improvement).
• Process Improvement
• Process of Constraints (or Eli Goldratt)
• Six Sigma
• There are also a number of terms around Six Sigma
• 80/20 Principle–also called the Pareto principle

The most useful for you will be:
• Lean Startup
• Edward Demming (just for a brief understanding)
• Theory of constraints (this explains the marketing funnel pretty effectively. In fact, I think there are specific breakdowns of sales & marketing in relation to the theory of constraints).

You will notice that the lean startup cycle mirrors Edward Demmings cycle as well. You can learn about Lean Startup from Steve Blank and Eric Reis. Both are grounded in an approach to business which is grounded in listening, action, feedback loops, reflection, and course correction (or Kaizen improvement). Businesses are an ongoing experiment–they are particularly that way in the early stages. Your goal early on are to 1) better understand the customer, their world, what they want, what their challenge, and context is–and how this relates to your product, how it functions, and how much value it delivers. Lean customer development and lean startup principles help shorten the process so that big failures can be avoided–but getting lots feedback (aka mini-failures) and iteratively improving the product or marketing/sales process in the short run.

There are a couple blogs around marketing lean start ups. I believe there is a free intro to Lean Startup on Appsumo by Eric Reis which is free.

If you google it on Youtube, you should run into videos by Eric Reis & Steve Blank (one that comes to mind is an interview Eric Reis did with Robert Scoble which is in 2 parts)

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