Monday, October 18, 2010

The Homework Matters

On October 13, 2010 I had the opportunity to listen to Mark Suster (Both Sides of the Table blog) present at the Stanford Entrepreneurial Thought Leaders series.  I like Mark's blog because having been an entrepreneur and a VC, he brings both the inside and outside view to the startup world.

The purpose of his talk was to "joust with some dragons" the dragons being Silicon Valley conventional wisdom.  He then proceeded to take jabs at the Lean Startup movement ("lean does not mean fast, fast means fast, rapid means fast..."), super angels, and most of all the notion of "fail fast."

But I thought his most interesting comment was this:   

"Silicon Valley is lazy."

Now before you get out the pitch forks, heat up the tar and feathers, and conjure up a flash mob in Los Angeles, it's important to understand the context of the statement.  He was not saying that people in Silicon Valley don't work hard or long hours in general.  He was saying this in the context of doing market research, i.e. doing the homework.  Unfortunately, market research has become an almost scatological term in Silicon Valley signifying "analysis paralysis", spreadsheet slight of hand, and navel gazing.  Instead, "launch and learn" usually shouted from beneath the banner of Customer Development, has become the new rallying cry as the substitute for market research.  And for many entrepreneurs with borderline ADHD and strong bias towards action, it feels so much better.

But since when did market research and Customer Development become mutually exclusive?  One definition of  market research is "the collection and analysis of information about consumers, market niches, and the effectiveness of marketing programs." Customer Development, as outlined in Four Steps to the Epiphany, calls for the statement and validation of multiple hypotheses including:
  1. Product hypothesis
  2. Customer & Problem hypothesis
  3. Distribution & Pricing hypothesis
  4. Demand Creation hypothesis
  5. Market Type hypothesis
  6. Competitive hypothesis
Hypotheses 2, 3, 5, and 6 fit squarely into the definition of market research.  In fact, what many people lose sight of is that Customer Development is a market research methodology.  Getting out of the building and A/B split testing are just the tools used to validate hypotheses to be added to other tools in the kit like customer surveys and conjoint analysis, each with its strengths and weaknesses.

Suster's point was that for some in Silicon Valley, "launch and learn" has become an excuse for laziness, for not doing the hard, sometimes boring, grunt work of market research.  Who are the players?  When and how did they get started?  What's been tried before?  How did the channels evolve, etc.?  But "launch and learn" does not eliminate the need to do market research, to know the industry, to do the homework.  Which led him to make another interesting statement that as a VC, "I'll pass if someone doesn't know the history of their industry." 

Thanks Mark, for a thought provoking presentation.

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