Just a few years ago, you couldn’t imagine reading an ebook. After all, your computer was the channel, and many of us don’t want to read a novel on it after we finish a day of work at the desktop. But with ereaders taking the world by storm, it’s no shock that ebook sales are up 159% in a single quarter. Do I need to say what this does to the print market?

The same is happening to the digital audiobook market. While physical audiobook sales were down 11.8% this month (who wants stacks of cds of books they’ll only listen to once?), digital audiobook sales are up 9% at $20.2 million. That’s the reason we’re in the industry we’re in. We know that the consumption of media is shifting and providing a ton of opportunities right now.

$20.2 million in digital audiobooks is just the tip of the iceberg.  There is a reason Amazon bought audible.com and Audible recently launched acx.com: they can’t keep up with demand.  It is extremely difficult for them to attempt to vertically integrate, so they are teaming with Amazon to create a marketplace.  Smart move.

We expect to see more of this partnering and print and physical audiobooks wising up and working with those (of us) who are in the digital space.

The other day I was having a debate with my cofounder over product segmentation.

We have 1 pilot customer, and he was debating with me on which feature(s) we should charge them (more) for.

My response was "We don’t even know what they find valuable today."  He didn’t really understand where I was going, so I expounded:

We should give them every single feature we can think of and implement and get their thoughts on it.  We should ‘kitchen sink’ them.

He did not think that was a good idea, because in that way, we are leaving money on the table and giving away too much for free, so I clarified.

We should kitchen sink them because they are our pilot customer and it’s from them we can learn what’s valuable, what’s not valuable, and what we can charge (more) for.  As a pilot customer they are basically debugging and market testing for us… and we get paid for it, so our best option is to learn as much from this customer as possible, even if it means leaving money on the table.  When the next customer comes along, we will have a much better idea of what to charge, and we will understand the value and ROI of those additional charges to our customers.  Right now, we don’t know what we don’t know, so any product decisions we make are conjecture.

He thought about it for awhile… then he agreed.  Score one for the product team.

The moral of this story is that it is very tempting to come up with additional features and try to drive additional value for those features, but as a startup, it’s safer to put those features in front of a customer and get their feedback before making any major decisions on free vs paid vs premium in terms of features.  Customer development and piloting is great, and its wonderful if you can get a customer to PAY for a pilot.  We have to learn as much as possible while we are still under the radar.

I hear a lot of people on my side of the fence (business/product/strategy) say ‘I bridge the gap between the business guys and the technical guys.’

My opinion is that if you cant prototype features (in real code) AND do some good bottom up/top down market analysis, you ain’t bridging nothing, you’re in the way.

Here is a common question in python:  How to turn a string into a date object:

import datetime

datestring = "2011-04-20"

date_format = "%Y-%m-%d"

newdate = datetime.datetime.strptime(datestring, date_format)

As a bonus, the reverse

datestring = str(newdate)

As a startup, we run into the issue where we have more ideas than resources, and we have more business prospects than execution ability.  This is tough because when a (paying) customer says ‘we want you to do this’, it is difficult to say no.  Money?  Money!

Last week, in talking about an idea that I had been bugging my cofounder about for weeks, I finally decided to put it on ice indefinitely.  Not because it’s not a good idea, but because making this idea real will take a lot of time, energy, and effort.  Most importantly, chasing this other idea is guaranteed to scatter our focus.  Scattered focus is bad for most anyone, but it is DEADLY for a startup.  We have to own the niche before we can branch out, and having a bunch of little twigs as a foundation is not as nice as having a big thick trunk.  We want a trunk.  Because its easier to branch from a trunk than it is to try to branch as a green sapling.

So just like pruning a tree, we starve the weak.  By weak I don’t mean it was a weak idea, but our ability to execute on it was weak.  Our ability to execute on it was weak because our attentions would be spread between this new thing plus the other stuff we are working on, and the other stuff we are working on is currently half baked as well.  So the moral of the story is don’t branch out until you have a strong trunk.

Most early stage startups don’t hire for product management.  Usually, the founders have a very strong product vision that they need extra engineering hands to help them bring to reality.  As a result, the team has a tendency to be engineering driven.  This by itself is not a bad thing.  We just need to look at it in context.

Startups usually fail because they run out of money.  Startups usually run out of money because they are not making enough money.  Startups don’t make enough money when the people they are selling to are not interested in buying.  Oversimplification, yes, but I wanted to draw a very clear line between failure and ‘getting customers to pay.’

Getting customers to pay is a function of marketing, sales, and execution, and a good product manager is one part sales guy, one part marketing guy, one part user experience designer, and the rest is x factor.  Xfactor is the good stuff, or at least it can be for an early stage startup.

Xfactor is what can make product expertise extremely valuable at the early stage of a startup.  A good xfactor product guy can help you understand:

- The Market Opportunity

- The Market Size

- The Competitive Landscape

- The Pain and Willingness to Pay

In other words, the ‘WHY’.  Not just for your customers, but for your investors and other stakeholders as well.

You need someone who can weave the narrative and thicken the plot for your vision.  A good product guy can turn your short story into an epic; broad and deep, then evangelize and refine it on the fly.  A good product guy can turn the vision into passion and passion into awesome products.  A good product guy can turn the context of the vision into customer arousal.

When we hire, we tend to hire for experience.  In other words, we want to hire people for what they already know, and mostly to do things they have already done.  This always bothered me as an employee because I switched jobs usually to do something *new*, but that’s a tangent I will try not to go down in this post.

When hiring for an organization that is looking to LEARN (such as a startup), then you need to hire people not for their experience, but for their curiosity and proclivity for self-directed learning.  How do you find those people?

You have to have an organization that attracts the curious.  I used to work for a company whose main marketing message to clients was ‘proven experience.’  This was usually backed up by reams of spreadsheet templates and powerpoints proving how we could pinpoint down to the minute how long a project was going to take.  Curiosity, in this context, was frowned upon.  Because the client was paying to get something done that we have done a million times the same way.  It didn’t matter that there was a potentially better way to do it, because the client was paying for predictability.  I could go down another rabbit hole just on the nature of predictability in technology projects, but I won’t, because the premise of this post is organizational learning.

Curious people are always wondering if there is a better, faster way to do something, and curious organizations attract curious people.  Thus, a curious organization is always tinkering with its internals to figure out how to best approach/attack/execute in the market.  The outward expression of curiosity is learning, and the organizations that ‘learn’ are the organizations that outperform.

Nobody wants to cook when they are sick… or map their financial model to their customers’ habits.

Q: How do I create a business?

A: By providing a solution to a problem that people are willing to pay for.

When we are putting together an interesting product to solve a problem that people are willing to pay for, do we know that they will actually pay for it? If so, how do we know?

I will give you an example. Generally speaking, I don’t buy prepackaged foods. So, the Lean Cuisine-type quick meals and the ‘meal in a bag’ type of meals don’t appeal to me. I am the type whose weekly grocery list looks close to the same every week, but with these same mundane ingredients, I can make whatever variety I want. Eggs, Butter, Milk, Flour, Beef, Chicken, Brown Sugar, Brown Rice, Fruit… blah blah blah. Same stuff every week. So the CONTEXT of my food buying habits is very important, because there are some situations where I buy prepackaged food.

1. When I am travelling.

2. When I am sick.

Ok, now we are cooking with Crisco! *Note, I don’t cook with Crisco. That stuff is bad news. Hydrogenated vegetable oil that never spoils!!*

But you get my point, now we are getting somewhere with a potential customer and understanding the CONTEXT of this customer’s habits.

So if you have your prepackaged food at my local Fresh n Easy, I most likely won’t buy it when I am going about my daily routines. But when I got the flu from my son and just wanted an easy way to load up on calories, you have a much better opportunity to make my life easy. Nobody wants to slave over a hot stove with the flu.

Why is this important? It is important because when we look at product development and financial models, we need to have a very good idea of who we are selling to, when, how, and most importantly, why. It is not enough to say ‘We are targeting males between the ages of 25-34 with our great healthy prepackaged meals.’ You have to spin a story, a persona, around who and why.

I love easy comfort food as much as the next guy, but only under certain circumstances. To assume I would buy it every week would lead to a mismatch between your financial model and my purchasing habits, and your Board will be sorely disappointed with how your projections didn’t match with reality.

So, to recap, who is very important, but ‘who and why’ can push you in a direction where your financial model can match very well with the habits of your user, and every time I get sick, I am buying ‘Morton’s Comfort Food Lasagne… cuz nobody wants to cook when they are sick.’

Often as entrepreneurs, especially for those of us who come from a technical background, we come up with an interesting idea that mashes together some technology in a way that would be really cool. “It’s quora plus facebook local social mobile on demand coupons with a sprinkle of yelp.” Sounds interesting, but where are the customers? In other words, “Who wants this, why, and are they willing to pay for it?”

Although we have passed the dot com bubble 1.0, there are many MANY startups who are still following conventional wisdom at the time ‘get big fast.’ This has its own merits, and for every time I say ‘How are you going to make money from this’, I get a dozen examples of Twitter-like viral growth thrown in my face. Well, those guys are cut from a different cloth, and could get funding without a clear path to revenues.

Usually, startups fail because they run out of money. It seems obvious, but when we peer into the inner workings of any given startup, what we see is a group of people passionately focused …on the wrong things. The focus should be on the customers, what they want, and the MONEY. I know it seems a bit taboo to discuss money and startups in that way, and we spend a lot of time talking about changing the world and disrupting an industry, but we have to keep our eyes on the big picture. We are building a business, and businesses, by definition, exist to ‘create value’ (Make Money).

So who are you selling to? Why are they buying it? What value do they get from it? What is so special about your offering vs the others? What are the problems your product solves? Do your customers see the solutions to these problems as ‘must have’? If not, can you convince them that they must have it? How big is this problem? The list goes on, but my point is that there is an inward focus that needs to be asking these questions as you outwardly execute. At that point, you have effectively derisked the endeavor.

I am a person with a technical background, and I took the typical route through project management to get to leadership positions.  In my corporate career, I have been mostly in charge of developers and other managers.  My interactions with product managers was usually at arm’s length, split between protecting my developers from them and getting them to ‘play nice’.

In building a startup, I have begun to think INTENSELY about products… management, development, strategy, ideas.  To the point that I am beginning to self-identify as a ‘product guy’.  Because where products make companies, technology is a tool to get there.  I am also thinking intensely about customer development.  My wife is a marketing consultant, and one of the biggest problems her clients have had is that they haven’t taken the time to understand their customers.  They take a ‘shot in the dark’ and say something like ‘we are targeting moms’, then they hope for the best.

So I just started reading Steven Blank’s The Four Steps to the Epiphany.  Aside from being excited about this book, I am a bit bummed that there is no Kindle edition.  Not only bummed but also shocked.

It’s interesting how the startup journey is starting to become a couple dozen points of recognized patterns.  I see this in Adeo Ressi’s Founder Institute and in Paul Graham’s yCombinator, and I think it’s a good thing.  Although there are some sadists in the startup community who take the attitude ‘I had to learn the hard way, and so do you!’ it seems the majority of people who have come out the other side of a venture alive don’t want others to have to repeat the same mistakes they did.