At the heart of every startup is a hypothesis.
There is, stated or not, an idea about what can be sold to a set of customers. The lean startup movement, led by Steven Blank (check out his excellent book) and Eric Ries* make this point eloquently and repeatedly, so I won’t rehash their words. The job of the CEO, they point out, is to focus on this hypothesis and then to test it, repeatedly, until the hypothesis and the actual market environment match, resulting in success and business for the company.
The CEO must make the market in information at their startup.
What do I mean by this? Consider the “market maker” in the financial sense, where it is most often utilized. A “market maker” is a liquidity provider. They are willing to take the risk to both buy and sell stocks, trusting in their ability to manage inventory of the stock. There are a few key things that they must do in order to be good at their job:
- Understand the supply and demand dynamics for each asset they trade in
- Understand their own organization’s ability to execute
- Consistently deploy their organization’s ability to take an immediate risk (the $.10 difference in the illustration) and then sell that risk for a profit.
The CEO’s ability to “make the market” determines company success
Just like the market maker, every CEO is focused on a matching problem. If they can figure out what their team can supply such that it is demanded in sufficient price and volume, the company can succeed and grow. The CEO gets paid on that matching of supply and demand and uses information in order to accomplish their goals. In order to do their job well, the CEO must be the master of information in their company. Every successful CEO that I’ve met and been around has always been incredibly savvy at making information flow appropriately in their organization. Typically, they:
- Ensure that information is flowing across the team
- Gather information from early customers, potential customers and the sales team
- Translate information from the team (here’s what we can build, are building and think it makes sense to build) and from the market (here’s what we want and what we would pay for) such that both sides move towards agreement.
“Making the market” in information can be learned.
As a startup CEO, then, it’s important to be focused on how information is moving internally and externally. Each CEO should be highly focused on efficient and productive communication among the team, while informing their work based upon what the marketplace is saying. If the external market is constantly asking for “faster, simpler” and the internal teams are totally focused on “more features, cooler design” then the CEO isn’t doing their job. Pretty simple.
In the past, getting meaningful information at a startup was very difficult, even if it was a tech startup. To be an excellent startup CEO, one often had to be an extraordinary communicator and salesperson – they were the ones most capable of gathering the requisite information.
Today, especially for tech companies, this is a lot less true. The explosion in information sources and the array of inexpensive information tools has provided aspring CEOs with the ability to quickly understand and make the market in information for their chosen problem. As I look around the landscape of today’s startups and the lean startup methodology, I’m struck by the number of companies that are rising to help management teams better understand their market. For example, consider how these companies are establishing themselves as indispensable to the product/market fit process because of their solutions to fundamental information problems:
- KISSMetrics: Analytics need to be focused on what makes a business go. They help you simplify and focus information.
- Unbounce.com: You got people to your site somehow. Use Unbounce to determine what most of them expect to see.
- AgileZen: Time spent on project management is often just time stolen from developing the product. Communicate project details faster and make improvement on your output a core goal.
- Balsamiq Mockups: Communicating information with your team about what the product looks like before ever writing code. Less wasted time, more meaningful conversations about product. The bonus is being able to easily talk customers through your vision.
- Pivotal Tracker: Build products as stories that match user needs with features. Track your productivity, learn about where there are snags and prioritize the stories that are most important to the external market
- Wufoo: Easy forms. Using Wufoo to learn more from your customers and potential markets is an incredibly easy way to gather more information in a consistent manner.
CEOs should constantly seek out new information sources.
While those are just a few of the companies helping tackle the information problems facing companies, they are really indicative of an encouraging trend. Innovative companies are providing some really impressive results for their customers by helping the CEO match the external and internal markets in information.
We’ve built Apptentive because we believe in the value of information sharing and enabling direct communication between the CEO and the customer. As we learn more about the principles of the lean startup movement and incorporate them into our work, we constantly come back to a core idea: more unfiltered communication is better. If you’re the CEO, your job is to make sense of the unfiltered communication, to seek out new information sources and to make your teams execute quickly on making happy customers. Go make that market
*Note: Eric Ries has a book coming out this fall about the Lean Startup