Startup founders often blame funding shortages for their failures. According to three recent studies, however, startups don’t necessarily require more money. Startups need to have more customer insight.
Startup studio Wilbur Labs surveyed more than 150 startup founders for their insights about startup failure. 30% of founders advised startups on how to avoid loss. According to the founders’ advice, they recommend that entrepreneurs do more research before launching a business. 54% of the founders suggested listening to their customers. The same percentage (54%) recommended that you “Ensure there is a market for your product.”
Tom Eisenmann, the author of Why Startups FAIL: A New Roadmap For Entrepreneurial Success, wrote in Harvard Business Review about one of six causes of startup failure. His use of “false starts” explains that some entrepreneurs want to launch a product quickly and take a “ready, fire, aim” approach. They are not familiar with lean startup principles, such as the mantras “launch early and frequently” and “fail quickly,” and they don’t do any research upfront to verify the demand for their product. Eisenmann said that “entrepreneurs waste time and capital creating MVPs that will miss their mark by not researching customer needs before beginning their engineering efforts.”
The tech insights platform CB Insights ReportInability to obtain financing/investor interests and running out of cash were the most common reasons startups failed. But, lack of market need was closely followed (35% failure post-mortems). According to the Y Combinator Seed Accelerator motto, founders are more likely than others to find interesting problems to solve. Customers’ insights are crucial to ensure that people want what a startup develops.
To increase the chances of a startup’s success, founders should view customer insights as a vital lifeline, just like funding. These three actions will help you get started with customer insight:
Create value for customers, not products. Most startups start with a product idea. Founders will often identify a way of solving a problem or improving an existing product and then develop their product. Sometimes, founders discover or create technology and set out to develop a product. Instead, they should first identify the customer’s needs and then look for ways to fulfill them. This customer-centric mindset will help the development process focus on what customers value more than what the product does. Furthermore, this mindset focuses on customer insights that give clarity about the problem and why it exists. These insights can be rich fodder for product or feature ideas and directions for pivots if required.
You can start by conducting customer research. You should also follow the mantrasLean startup approach follows these steps. The methods should be followed closely by founders. Lean does not only mean falling fast but also failing cheaply. It is a methodology that includes market discovery. Meet with customers to understand their needs, challenges and get their feedback on potential business models and products. This will make it easier to ensure that their product meets the minimum viable product (MVP) when testing is done.
You must commit to listening to and implementing customer feedback. It takes money and time to collect feedback, which is not always easy for startups. It can be challenging for founders to receive criticism after putting so much effort into their product. Sometimes founders feel smarter than customers. However, that doesn’t diminish the value of customer feedback. Although it is understandable to be reluctant to seek customer feedback, it must not be allowed. Founders must have a healthy appetite and commitment to customer feedback.
A steady stream of quality customer insight is crucial for startups and all businesses.