Lecture 2
18th September 2012

I arrived early, keen to observe the collective energy.  Interestingly, the mood had faltered a little.  Students trickled in and whilst there was chatter in the room, the group seemed to lack the level of exuberance that had defined the first session.  I wonder whether they are grappling with the magnitude (and unpredictability) of the task at hand?

I noticed also that we seemed to have lost a class member.  (A quiet conversation with David during the break revealed that this student has concluded that he simply lacks the bandwidth at present to do justice to the demands of the course.  A decision to be respected in my view.)

A Reflective Start

David took to the floor punctually, opening the session by providing feedback to the students on their first weekly reflection task.  During the break David shared some of the student reflections with me…

“A lot of what I have observed revolves around inspiration and without it you’re not going to move forward”

“I need the conceptual tools of entrepreneurship to take my idea from a piece of paper to a product in the consumer’s basket”

“It is important to find the problem and only then to seek the solution”

“The reason why I have not even taken the first step in the business idea that I have is probably that I am afraid of failing.  I do not have the courage to face the high risk it will bring.  It also made me realise that an entrepreneur never takes unnecessary risk.”

“It is almost impossible to be an entrepreneur if you unconsciously avoid failures or making mistakes”

“The literature has made me more mindful of not identifying failure prematurely.  Rather, I need to consider obstacles as just signposts for taking a different route, as opposed to being the end of the road”

I am struck by the willingness of the students to connect with their feelings and to expose their vulnerabilities.  I recall David’s words of the first lecture – this is part commercial opportunity, part personal journey.  And I feel privileged to witness something of the personal journey.

What does evolution of a business model look like?

A quick reminder that each team must present their business model canvas to the class every week, depicting the development of their thinking. I’m keen to see the unfolding ‘time lapse’ as the businesses take shape.

David then presented an example of a previous team’s final presentation.  I was fascinated to see the transition from the initial very elaborate business model canvas to a significantly simplified final version.

David ran through the slides, dwelling at the end on the key learnings of past students – a few clues and a bit of a shortcut for current students!  In essence…

  • A succinct and believable value proposition is crucial;
  • Consider the competitive landscape early;
  • Market sizing is crucial (ie, just what is the value of the addressable market?);
  • Be open to pivoting (ie, changing direction);
  • Relationships matter – team, culture and mentors; and
  • Gathering the right data is imperative, be wary of relying on ‘top down’ data which merely describes a pre determined view of the world.

David recounts an amusing yarn in support of this last point.  A very drunk gentleman is fumbling around in the street outside the pub in search of missing car keys.  A kindly stranger offers to assist, seeking to understand where the keys were last seen :  “In the car park.”  So why look under the lamp post? “It’s the only place where there is any light.”  The moral of the story? Typically available statistics shine light where you may not wish to look.  (And for most new businesses there may not be a lamp post at all.)

Eating your own Dogfood?

As if to further drive home the search message, David steps into story teller mode, recounting an experience of long ago and far away….

Whilst working for a strategy firm in the US, David was part of a team engaged to assist a dominant national retailer address an alarmingly low share of the pet food market.  When David’s firm sought to understand the customer, they were presented with a deluge of existing market research material accompanied by protests from the client that investment in further research was simply not necessary.

Not wishing to offend their client, David’s team suggested that perhaps the data was the problem and set about conducting a small experiment, interviewing just 32 customers.  What they learned was that three predominant pet owner types exist…

  1. The Designer pet owner who aspired to have the best fed, groomed, disciplined and accessorised animal;
  2. The Family owner whose animal was indeed a family member – a hairy human, living in the house, sleeping on the sofa and eating human food;
  3. The Reluctant owner whose kids had left home leaving the parents with the obligation of ‘keeping the animal alive’.

On the basis of this research, the retailer reorganised their pet store departments into three corresponding areas and watched sales double within a 6 month period.

The learning : ‘bottom up’ listening is crucial to deep understanding.

As I listen to this story I am hit by a rather uncomfortable realisation.  I suspect I tend to approach life with an existing model of the world to which I try to fit data.  And it is with some discomfort that I realise just how slow I have been to re-examine this model.

The learning for students I guess is that conventional research quantifies an existing hypothesis or model.  This ‘bottom up’ approach requires the creation of a new model which can then be evaluated.  (And that requires students to get out of the room and talk to people!!)

What are you worth?

Just when I think I’ve got the ‘listening’ message, David tells yet another story to illustrate the importance of really understanding the customer’s problem:

David recounted a situation faced by a major financial planning organisation some years ago.

Representatives of the organisation invited couples to attend an information seminar designed to assist with planning for retirement.  By way of preparation, the couples had been asked to complete a questionnaire describing their financial position.  It seemed that the significant ‘no show’ rate was due entirely to an unwillingness to expose financial vulnerability, driven by an underlying assumption that wealth was perceived to be an indicator of one’s social worth.

Once the problem was truly understood from the customer’s perspective, the questionnaire was scrapped and couples were invited to engage in a ‘conversation’ with a pre-planner during which a non-threatening assistant gathered relevant data.  Allowing customers to retain their dignity resulted in a far more effective outcome than delivering an efficient process through use of a questionnaire.

Take a look at the story…

And once the real customer need emerged – inadequate retirement funds – so too did the real opportunity : assisting customers to find transitional employment.

An Unorthodox Study

David then invited the students – in a somewhat unusual manner – to redesign the business travel process.  No doubt you have experienced the tedium of on-line bookings, airport check-in, queuing for cabs, hotel check-in, working, dining alone, working, packing, queueing for cabs….All too familiar?

Students were asked to reverse each step of the process, so instead of ‘check in’, one would ‘not check in’.  I could feel the energy build as students were encouraged to be unconventional, creative, and just a bit crazy.  My favourite practical suggestion : frequent travellers could house a wardrobe of suits, shirts, shoes etc. at the hotel which would be laundered and stored ready for each return visit.  So no more luggage, no packing and unpacking, no cleaning.  My favourite indulgent suggestion : the hotel should make personal shoppers available to guests wanting to update their image, refresh their wardrobe, access the latest designer range without having to leave their room.  Sign me up!!

Take a look at some of the other student suggestions in the “Orthodoxy Analysis” video clip…

In the space of 20 minutes the students had redesigned the hotel industry.  So why hasn’t this been done before?  Perhaps the answer lies in two factors.  Firstly, it seems that this reversal process breaks a fixed mindset.  We get stuck in an orthodox way of thinking and lack a deep knowledge of what the customer really wants.  And secondly?  People working in the industry are not the customer and (like many industries) have a tendency to use a pre-defined model to understand customer preferences.

A Wonderful Act of Rebellion 

Still on the theme of listening to the customer, David played the soundtrack of a story told by Dr Atul Gawande..

Professor Warren Warwick is 76 years old and has been the Director of Fairview-University Children’s Hospital’s cystic-fibrosis center for almost forty years.  This clinic has the highest life expectancy of cystic fibrosis patients of any clinic in the US, exceeding national averages by some 14 years.  I’ve enclosed a link to the original article here, published in The New Yorker in 2004.

If you read nothing else, jump in at Janelle’s story, starting on page 88.

Creating a Rebel (PDF)

Janelle is a 17 year old high school senior whose health outcomes are slipping.  With a little creative and persistent probing, Warwick discovers that Janelle has become erratic in taking her treatment.  It emerges that (amongst other things) her school has changed the rules such that all medications must now be dispensed via the school nurse. On discovering this Warwick counsels Janelle to keep her medication in her pocket, thus turning taking care of herself into an act of rebellion.

It’s a beautiful story of listening deeply to really understand the customer’s need.

Searching

This evening’s lecture draws to a close, with David’s concluding remarks encapsulating the    importance of the search process, and of really listening to to the customer…

“Premature execution is one of the most common reasons for start up failure.  It often happens because the start up needs some money to survive and then stops the search process in the belief that they have found their business model and need look no further.  When you have found the segment that has the common problem that you have designed a business model to profitably resolve THEN you are ready to execute and scale.”

Signposts

As I pack up my laptop and reflect on what I have learned this evening I am struck by the thought that I really have no idea where all this is heading.  (And indeed how I might shape this blog!)  But perhaps that’s the point.  The entrepreneur may well have no idea of the path she may follow yet proceeds confidently in the knowledge that if she listens intently, the signposts will emerge.

Not a bad metaphor for life.

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1 Response to “Lecture 02”


  1. 1 David Nelson September 26, 2012 at 12:20 am

    Excellent summary Jane. For the record I don’t think it’s too wordy and an excellent refresher of the lecture. I had forgotton some of those things already!


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