Companies built on customer needs are all too rare

factory machine producing customized item based on customers' needs preferences style and requests

Originally published on December 22, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/companies-built-on-customer-needs-are-all-too-rare/article33213377/

After years of fussing over KPIs, management by objectives and zero-based budgeting, I am pleased to see more and more business owners coming to grips with one essential truth: without customers, there is no business.

It sounds so simple. But companies that are designed and built around the needs of customers are scarcer than tulips in December. Businesses are started for many reasons – to put bread on the table, scratch a creative itch, fill a perceived need – but rarely to serve a specific client base. Companies have to learn to put customers’ needs ahead of their own, and it’s a journey that will last a lifetime.

Some of the worst offenders are startups – particularly the high-growth tech startups that Canada is counting on to generate jobs and export revenues. Typically started by engineers and scientists trying to solve specific problems, these companies tend to be product-oriented. When they encounter a setback developing a new widget, they are more likely to tackle the problem with new approaches or technology than by talking with customers to ensure they’re still on the right track. Result: many startups go through a series of jarring, risky “pivots” rather than continuous, informed iteration.

But there are signs of hope in the Canadian startup scene. More companies are joining incubators and accelerators to learn entrepreneurship from mentors, advisers and fellow entrepreneurs. And increasingly these groups are pushing the idea that success doesn’t come from the lab, but from meetings with customers.

In Ottawa, Carleton University’s Lead to Win program is one of North America’s Top 10 university business incubators, according to Swedish research and benchmarking firm UBI Global. Lead to Win was founded in 2002, following the bursting of the tech bubble, to help Ottawa-area technologists become business founders. That meant immersing them in the entire business community: professional advisers, seasoned coaches, service-providers, other entrepreneurs, suppliers, investors, and, yes, potential customers.

“The research is clear: high-achieving technology entrepreneurs operate in a business ecosystem that includes many different stakeholders, including partners, critical suppliers, and market channels,” says Dr. Steven Muegge, an associate professor at Carleton University, and one of the organizers of Lead To Win. Companies applying to Lead to Win go through a rigorous opportunity review process to ensure they’re ready to benefit from the Lead To Win ecosystem in ways that create value for themselves and for their partners, Muegge says: “If the founders are only thinking about the product, they’re probably not ready.”

Although Lead to Win stresses an “ecosystem” approach, its key success metric is sales: companies that earn entry to Lead To Win must demonstrate potential to generate $1-million in annual revenues within three years. “A good product is not enough,” Muegge says. “Revenues are the proof that what you’re doing is valued by customers.”

Program advisers and mentors help the entrepreneurs to identify prospects, build a pipeline, train salespeople, work on their pitch, and arrange customer meetings. Advisers may even sit in on early customer meetings. But what they’re best at, Muegge says, is demanding progress on all of a business’s sales activities. “We train and support, observe and provide feedback, and keep metrics, but the entrepreneurs are ultimately responsible for sales. They know that, on Monday morning, someone is going to ask how your sales call went. It creates accountability.”

In Waterloo, Ont., they’re setting high targets for customer development. Communitech, an industry-led technology association, has launched a six-month sales-acceleration program called “Rev.” Its goal: to give startups the vision and process to scale to $100-million in revenue.

With the aid of experienced product, marketing and sales executives, Rev helps client companies master all the intricacies of sales: segmenting and targeting markets, pricing, developing key messages, building buyer and user “personas,” perfecting their pitch, and building and training a focused sales force. Rev also tackles a challenge most startups overlook: finding large distribution partners to scale up sales quickly. “These are aspects of building the business that most of our founders have never confronted before,” says Communitech executive director David Chalmers. “At Rev, we build that structure out.”

Companies enter Rev with a product or service, and some sales. “Rev tries to work with the foundation they’ve created,” Chalmers says. “But sometimes, there is a reset. When you’re growing companies, what you did historically, might not be the same framework that is required to take the company to new heights.”

The biggest hurdle, he adds, doesn’t usually come from the market – but from the entrepreneurs themselves. “When CEOs come into this program, they have a good understanding of their business. Our goal in Rev is to work with them on the areas that require more due diligence and refinement, specifically those related to revenue attainment and growth. In other words, you need to see your business from the customers’ point of view, identify functional gaps, then build the necessary tools required for sustained growth.”

The good news is that once you accept that reality, your viewpoint shifts immediately. By the time Rev CEOs graduate from the program, Chalmers says, “Their go-to-market strategy becomes very transparent and their business confidence goes right through the roof.”

Open your eyes and ears to your customers. Success is waiting. Up there on the roof.

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