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The Mean Startup (or a failure in customer development)

A few years ago, almost straight out of college, I was in charge of developing innovative products for a global service provider in the telecom industry. My job was to pitch ideas internally, get budget approval, then work with engineering and sales teams globally until the first sale was made. Getting paid to build corporate ventures and then travel around the world, that was definitely a hell of an experience for someone with not much experience.

The first venture our team built was a huge success: more than 150 mobile operators bought the product in less than a year for a total yearly revenue of $7M. It gave us a lot of credibility internally for our second venture which, as you will see, failed miserably. What I didn’t know at the time though, was that the first product (the successful one) had known features and known customer needs! This product was based on specifications from the GSM Association and mobile operators were mandated to comply with this new specification before a set date. Our job was then to develop a solution with core features as per the specifications, some value-added services, and then try to persuade as many customers as possible that they should comply with this new specification and they should choose our product instead of our competitors’. As I said: known features and known customer needs.

In that sense, our second venture was very different. We were building a business intelligence solution for mobile operators but, this time, without any specifications for the GSMA. Said differently, unknown features and unknown customer needs. In our initial business plan, we had 1 year to sign the first customers and then, for the following years, we were gradually going to sign most mobile operators in the planet as we were convinced this product was going to be a must-have in the ecosystem. In terms of features, we had a small list of features we believed were the core ones and a huge list of features we wanted to test with the first customers. So you know, the core features had been validated by one test customer.

To our team’s defense, we didn’t completely rush to develop all the features on our list without talking to customers. We built a first prototype of the solution in a couple of months and then I started travelling around the world to demo the prototype to as many potential customers as possible. And every time, it was the same positive reception: customers loved and validated the concept. In parallel, our development team was continuing to add more and more features as these were validated every time by the potential customers I was meeting.

It’s only by the end of the first year that we started to realize we were wrong. A few months earlier, we started to sign off potential customers for free trials but very few of them actually tried the product (what is free has no value). Just two potential customers actually came back to us with productive feedback. And God, it was bad. Conceptually we had everything right but all the features were wrong. For example, we thought customers wanted predictive algorithms but they wanted to import their own predictions in the tool (this was in 2009, way before big data went mainstream). And the list went on and on…

At the end of the first year, we had spent more than $1M developing a great product that no one wanted. My management decided it was enough and shortly after shut down the project. I personnally moved to another position within the company. A few months later, I met with one of our former potential customers who told me that he purchased our competitor’s solution. Then he said (I’ll remember this my whole life): “this is really a shame as you guys were right and evangelized the market but did not manage to get the product right”.

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7 Mistakes Corporate Accelerators Make

As stated in an earlier post, more and more big corporations are becoming interested in startups and some of them believe that creating their own accelerator is the best way to interact with them. And in more than a way, they’re right! As most startup accelerators are accepting many types of projects, the probability for a big corporation to find a startup with whom they want to partner is usually close to zero.

So opening their own accelerator and advertising their own challenges to attract startups working on these challenges seemed the best thing to do for big corporations. Unfortunately, it appears that some corporate accelerators that opened recently are struggling to attract the best startups and it is, usually, due to the same mistakes. I tried to put together a list of the most frequent mistakes I saw made by corporate accelerators, based on my own experience in the Paris startup ecosystem but also my interactions with accelerators in other countries. Of course, it doesn’t mean that “classic” startup accelerators do not make mistakes, so to my corporate friends, promise, next post is on the startup accelerators mistakes ;)

  1. The unused 200m2 in your office is not an accelerator. This is the most common mistake. You realize that you need to get closer to startups, you have spare space in your office, startups need offices, et voilà! Unfortunately, while this might has been true in the 2000’s, it is not anymore. Startups need much more than space and, moreover, if your office is located far away from where the action is going on (city center for Paris), no quality startup will show up.
  2. Your brand is not enough to attract the best startups, even if you have a very powerful brand. In Paris alone, I already lost count of the number of accelerators, incubators and contests for startups. Entrepreneurs have now the power to choose and they will choose the best for them. That’s why the competition to attract the best startups is getting tougher and you need to do way more than good PR. Get out of the building and find startups where they are.
  3. Your colleagues are not credible coaches/mentors, and even if it’s true no one from outside will believe it. Big corporations are seen as sloppy, inefficient and disconnected from the entrepreneurial world and you need to compensate that vision. You can, for example, involve outside entrepreneurs (whom you know and/or work with) or involve your colleagues that have been entrepreneurs previously. In both cases, advertise it!
  4. “Lean design thinking” consultants are not mentors, they’re usually the contrary. Methodologies are great, canvas are very important but entrepreneurs always end up doing what they want and they’re always on the rush. Instead of bringing in consultants with no real-life entrepreneurial experience, even if it’s to talk about the same subject, invite entrepreneurs that have real-life stories to illustrate the points you want to make.
  5. Startups don’t manage innovation the way you do. They’re unstructured, (very) fast-paced and, most certainly, they will pivot once or twice during the program. And it’s normal! Don’t try to teach them about release cycles, test strategies or this new agile development methodology. It works well for known products with known features but poorly for startups that are developing unknown features for unknown customers.
  6. Accelerators are not PR, and if you consider it like that, most certainly you won’t exist in 2 years. Accelerators, like most organization (for or not-for profit), need to have a business model. While most of us out there are still struggling to find sustainable business models, you should as well. Otherwise, your line of budget will be the first to disappear at the next finance meeting and it will definitively alienate your chances of really succeeding at partnering with startups and getting innovation outside-in.
  7. Money talks! Like really, it does. The absolute number one reason why an entrepreneur will select an accelerator is the amount of money they can get from it. Then, it’s about program recognition, mentors’ credibility, etc. So, why do you keep not investing money in the startups you accelerate?? Big corporations are seen from the outside as very rich (people don’t care about your budget problems), so when you decide to not invest (or worse, coaching for equity), it’s almost a no brainer for the best startups who will go to another program.

I have most certainly missed other mistakes that corporate accelerators do. If it’s the case, don’t hesitate to reach out to me directly on twitter and I will update the post accordingly ;)

Hello :(

Hello Show OrangeOn October 2nd, Orange held its Hello Show event to unveil their latest innovations and show their strategy. The show can be replayed entirely here, Olivier Ezratty wrote a very extensive review of the show on his blog (in French) and you can also find a short review by RudeBaguette (in English).

My general feeling about the innovations unveiled is not really good. While they preach for open innovation, Orange can’t really stop developing solutions internally. I’ve worked with Orange in the past and I’ve never seen a company so caught up with the “not invented here” syndrome. The result? It seems to me that Orange is playing catch up with a lot of solutions that already exist in the market like with Orange Drive (Waze, Maps), Mobile Connect (Dashlane) or Homelive (Archos).

Concerning Homelive, a box to control the connected objects in your home, it’s competing directly with the Home by SFR box released 2 years ago. And given the amount of commercials I’m seeing for this product right now, it seems that it’s not selling as much as expected. On a side note, with the big success of connected devices with machine learning capabilities (like Nest‘s products), I really don’t get why we should have to go on our mobile to turn on the heater or turn off the lights… It should be done automatically.

All in all, and even if they say otherwise, the message sent to startups by Orange is not very good: innovate, we’ll look at it and develop it internally.

Inspiration of the day #5

Steve Blank
Steve Blank

How to build a startup

If entrepreneurship education had a pope, it would inevitably be Steve Blank. After 21 years in 8 high technology companies, he retired in 1999 and wrote a book  about building early stage companies called Four Steps to the Epiphany. It’s been called the book that launched the Lean Startup movement, popularised by Steve’s student, Eric Ries.

Steve now teaches entrepreneurship at U.C. Berkeley, Stanford University, Columbia University, Caltech and UCSF. Together with the “Customer Development” model he developed, Steve has also merged Eric Ries’ Lean Startup and Alexander Osterwalder‘s Business Model Canvas into the Lean Launchpad course he now teaches around the world.

The Internet is full of material on the Lean Launchpad but I do recommend to watch the Udacity’s course. This is the most rational and practical methodologies ever realised to launch startups and it also applies to corporate innovation management. Watch it!