Differentiating the signals from the noise

In March of 2021, in the thick of the pandemic’s second wave, I had decided to move to a new city. I was joining a boot-strapped startup led by founders I had only met remotely. After having taken a cross-border remittance platform startup (funded by Paytm, ICICI Bank, Infibeam Avenues, etc.) from ground zero to market leadership in India, while also setting up the payments infrastructure for Reliance JioMart’s 3rd party (M)SME marketplace backed by the likes of Facebook & Google, I was wary of what I was getting into. Yet, thrilled with anticipation.

3 things pulled me in:

A customer development approach vs a product development approach. In simple words, finding customers first, building the product second. In multiple articles and podcasts, the company spoke about this approach.
A culture of learning. A company-wide desire to constantly upgrade one’s skills every day.
A few multi-million dollar deals that were just around the corner. If we won some of them, it would be as good as a Series A/B fund-raise, without having to let go off any equity to a VC.

In April of 2021, we got a couple of those deals. Now, we had to deliver. Over the next few months, I proactively made time to read books (including many recommendations) that could give me actionable insights on the customer development approach and how to build the right culture across the company to regularly ship breakthrough products from our stable.

In my previous stints, I had travelled the world identifying potential customers who would be interested in our pre-built products which we hoped would disrupt the incumbents in the space. Now, at Nuclei, I was meeting customers to discuss, take feedback and identify new opportunities that they had not yet explored or ventured into.This collaborative approach to building products was new for me, and I loved the possibilities it opened up to everyone involved.

Listen more. Talk Less.

After meeting various senior bankers, strategic partners, consultants and start-up founders over the next 9 months, I have made 8 observations from those customer development engagements:

1. Spend a considerable amount of time speaking to customers. Don’t rush into product development.

“No brilliant idea was ever born in a conference room” wrote F. Scott Fitzgerald. Rightly so. I’ve been guilty of building products in the past with not enough understanding of what specific customer problem it would be solving, but rather a self-assessment of a perceived need of the end-user. Unless you walk in someone’s shoes, it is difficult (if not impossible) to think like they think, feel like they feel, and understand what they’re going through.

Talk to as many people as you can, keep your ears open, listen more and talk less. Be patient with monologues, or conversations that don’t seem to add much value for the most part. There could be light at the end of the tunnel. Learn to ask the right questions. Sometimes they are more important than immediate answers.

2. Break down your conversations into 3 meetings.

1st meeting — Develop empathy. Identify the customer problem and its root cause

2nd meeting — Propose a solution to this

3rd meeting — Have the sales talk

The first conversation with potential customers should be about building empathy, focused on listening to their story, understanding their problems. It should not be a sales pitch. If handled well, such conversations can open up wells of information with customers feeling they’re with a product therapist who is all ears and is keen to solve their problems. Product managers are expected to gather the right insights from such conversations, rather than constantly worrying about whether the time invested here is leading towards a sale or not — something that comes to sales folks naturally. Such meetings are meant for trust-building and giving the customer a sense that their problems are well heard and understood. Do not pitch, do not get into sales mode. The product manager should feel no obligation to offer solutions in the very first meeting, and should much rather avoid it even if a solution comes to mind already.

After going back to the drawing board with key information, the product manager can further hone the solution in a manner more suited for that specific customer, and offer the same in the next meeting. It also gives the customer a sense that due respect has been given to the problem and curated solutions are being offered to them.

If this meeting goes well, a sales officer can be included in the 3rd meeting to convert a warm lead into a paying customer eventually.

3. Ask open-ended questions, and be nimble in your conversations. A pre-decided path or structure may not help you find the gaps you actually started out to identify. Look broadly before you zoom.

The moment we hear the term ‘customer interview’, most of us are tempted to be best prepared with a ready list of questions and doubts, successfully receiving answers to which give us a sense of success with such meetings. While doing a back-ground research is necessary to make the most out of such conversations, an experienced interviewer tends to be nimble. They usually ask open-ended questions instead of leading ones that influence the interviewee to answer in a specific way. Going with a long list of pre-decided questions also makes us inattentive sometimes, mostly waiting for the right moment to butt in with that “intelligent” question, meaning small cues or nuances in the conversation can be missed. Keep the list small, keep your ears open, be ok with having to close a conversation in case the very first few answers show that there is a lack of interest or that the perceived problem isn’t a concerning one for the customer.

We also tend to zoom in on specific areas that somewhat align with how we perceive the problem to be, often resulting in a lot of bad data that makes a lot of sense to us at that given moment. Such data makes us take product building decisions that eventually fail, but could have otherwise been avoided by asking follow-up questions of different types before zooming into the area. Product managers must trust their own half-baked ideas lesser, instead gather insights from what they hear from potential customers.

4. Know what you want to find out from these conversations. Don’t go unprepared.

While you want to have open-ended conversations, it is equally important to gather at least 3 insights from each of your customer conversations. These 3 insights could be very different for each customers, so do a thorough research on where they currently appear to be in their journey of solving the problem at hand. If it takes 15 insights to eventually decide on building a product, you may not get all of them from one conversation. Break it down to multiple conversations instead. Aim to get 3 insights from Customer A, another 3 from Customer B, 3 more from Customer C and so on. Many of these may overlap, thus the need to have even more conversations. Attempt to validate your hypotheses though such conversations.

The more data you have at hand, the more chances of you getting it right and having a paying customer when your product is shipped.

5. Ask the right questions.

How do you differentiate a good question from a bad one? Rob Fitzpatrick (author of The Mom Test) suggests you ask yourself these 3 questions about your questions:

Is this a leading question or a biasing question?
Am I asking for an opinion on my idea?
Is this a trivial question — one that doesn’t move my business forward?

If the answer to these questions is no, go ahead and ask that question. In certain cases, you may still get a fluffy answer or a positive one that seems suspicious. In such cases, try and dig deeper. Ask them when was the last time that they did what they say they love. If your customer gives you a clear answer to this, it means that this data can be taken seriously. Feel free to understand the ‘why’ behind something someone says — most people aren’t offended when asked so — in fact many times it opens up the conversation wide because they love speaking about their opinions and being heard.

As the end of such conversations, it is also important to know if:

They hold the budget to solve this problem, or how much they’ve already spent on this or similar problems. This leads to understanding whether the problem is important and big enough for the client to back it up with a decent budget.
They know others who can help. Conversations via references are always more fruitful since people are obliged to share information to someone referred by a person they respect.
There’s anything else one should know about this topic. People are sometimes compelled to share an interesting insight.

6. Be prepared to strike a conversation any time. Keep it casual. Make it a part of your DNA as a product guy.

In traditional companies, meeting a potential customer is a large affair. They send out meeting invites well beforehand, define clear agendas on the outcome they expect from the meeting, meeting at a formal setting and perform the meeting in a structured manner. This adds unnecessary pressure to both parties in the meeting, resulting in everyone being very measured and cautious, making sure they don’t blurt out something they shouldn’t have.

Customer development meetings shouldn’t ideally turn out that way. You should be prepared to meet your customers at a coffee shop, bump into them on a metro ride, be in the same office space meeting someone else and just drop by their desk, or even while sharing an office smoke in the lobby downstairs. Meetings can be casual in nature and informal, thus allowing people to let off their guards and letting you into their world without being held accountable to the information that has been shared.

It is the product manager’s job to differentiate the signals from the noise, and gather the right insights from such informal conversations. Your customers should trust you enough to know that you will, because it helps their cause as well and makes it easy for them.

7. Small aspects of what your customers say can make a big difference to deciding whether your end-product will be meaningful to them. Keep your ears open.

Take notes, revise those notes, re-write them better, discuss them at length with your colleagues. We tend to over-estimate our memory by not taking important notes during the meeting or right after the meeting is done. As the number of meetings increase, this becomes all the more important. One can design their own form of taking notes — shortcuts, symbols, cues — and refer to them immediately after the meeting and write them out in detail. The more time you take before writing down these notes, the more number of items you will not remember, converting an actually excellent meeting to only a good one.

Yes, there are some elephants out there who remember everything clearly for long periods. The general population doesn’t though. It’s always safer to spend your time thinking, and not remembering.

8. Identify product risk vs market risk

Based on insights from your customer development activities, before you actually start building your product, ask yourself these questions:

Do I know if end-customers will actually use it? Can I grow it? Will they keep using it?
Do my customers really want this? Will they pay for it? Are there enough paying customers?

If you don’t have clear answers to the 1st question, you run a product risk. With the 2nd question, you run a market risk. Either type of risk should be avoided. The primary idea behind executing such customer development meetings is to find answers for such questions. Repeat the process a few more times with your preliminary customers or look for new ones to speak to.

While the customer development methodology doesn’t guarantee success, it helps reduce a lot of uncertainties and risks involved with investing the required bandwidth of expensive teams (product, design, tech, program, etc. — tech most of all! Ask Bangalore based companies who can’t offer Harley Davidson bikes, Volkswagen cars or De Beers jewellery for employee retention!) into building a product that will eventually have paying customers.

Again, these are experience-based suggestions on how to approach a particular idea that you have in mind. Many of these are learnings from books I’ve read in 2021, those I’ve experimented with and found useful to share with everyone.

The key to getting started with this is to get out of our conferences rooms & offices and meet more people. Build empathy, keep an open mind, trust data over your gut (in most cases, if not all — Steve Jobs & Jesus — I agree with what you say too — “they may not always know what they want”) and believe that there could a learning opportunity, large or tiny, from every conversation.

Lastly, filter out the noise.