I’ve been thinking a lot about customer development over the past few months. It’s a new way of thinking as a company, it’s a new way of approaching marketing, product building, and customer service. It’s changing, or maybe already has changed, the way companies think about the relationships with their customers, and it’s never been easier to employ this strategy than in early stage technology companies. And that’s exciting.

One of the smartest pieces of startup advice I’ve heard in a while was Andy Rachleff of Benchmark Capital saying, “The most important thing to look for in a founder: Authenticity”. (thanks to @TristanWalker for pointing me to this quote) The same goes for evaluating a startup as a whole, is the corporate philosophy of the company true to it’s actions? Is the company authentic about what they tell customers and partners? Take Comcast for example: They say they are listening to customers, they have a large team scanning twitter to make sure that customers voices are heard, but they sure as hell don’t seem to be listening to customer feedback about their phone support, or cable and internet packages. In short, it’s terrible. They’re not using customer development to drive their product offerings. True customer development focused startups make this a priority, and that helps them brand themselves as authentic.

Companies that that make learning a priority are exciting and they’re the type of companies I want to work with.

Today I was in a mtg about how GE will work to reach out to potential job candidates. Surprisingly, the recruitment practices are on the cutting edge of listening and reaching out to candidates and meeting them on the platforms that they use. They’ve abandon the “they’ll come to us” mentality that will fail every time. I don’t care if it’s a 2 person startup or a Fortune 2 behemoth, you have to listen and engage in customer feedback at the customers level or you will no be able to accurately road map your product.

Similarly, with the work I’ve been doing with Foursquare the team is very interested in the user feedback. To the point that they are intimately aware that the game must develop with user feedback in mind for it to remain compelling. With the recently inclusion of deals ‘in-game’ it’s only become more valuable for users. In the past it was just fun, now Foursquare is benefiting users financially, and that has staying power.

LEARNING companies solve problems quickly while remaining true to their strategy. LEARNING companies keep users and customers happy even when they don’t give them everything they want. LEARNING companies focus on long term value and they don’t let their products get stale. LEARNING companies measure the metric of user/customer engagement and realized that there is valuable data to be measured there. LEARNING companies listen.

If there is one thing that will be consistent with my career, I want to work for LEARNING companies.

image via flickr

In October of 2008 I launched a company called SocialDreamium LLC. I started out doing social web consulting work and used the revenues from that to fund the development of our first product. I recruited a co-founder and development team in December 2008 and we “broke ground” on our product just before the New Year.

Now in late-May 2009 we’ve decided to shut down SocialDreamium and move on. What did we get out of the business? A much better understanding of the social web landscape and significant entrepreneurial lessons learned. As much as I don’t like writing this post, it’s extremely valuable for all of you who are, or will be, in the same boat. The startup road is a narrow and rough one to travel along, my only hope is that you will be smart enough to learn from my mistakes. We weren’t just unlucky, we screwed somethings up; below are many (but not all) of the top lessons I learned from the 8 months we devoted to SocialDreamium.

Project Management Is Not Fluff

This is an area where I’ve probably learned the most. When I started out with SocialDreamium I thought that this project would be completely different from any large project that I’ve managed at work. I thought that the PM style I execute at work was much different than the style required on a startup. Dumb. Project management is project management, and it is important for startups because at the core it’s about getting things done. Execution and using resources appropriately is the name of the game.

Deadlines became a large issue for SocialDreamium and a good project plan helps to manage risk. It helps keep open and responsible communication between team members and have a clear understanding of who is accountable for what. With a good project plan you will keep costs lower (mostly time) and work more effectively because of the plans inherent ability to prioritize your work. I will now take more time to plan and document the goals of each step. Milestones and deliverables to hit those milestones are critically important.

How to Handle A Miss

When starting up you better love mistakes because you’re going to make many of them, the key is learning from them. I made the mistake of not handling misses appropriately during the early stages of SocialDreamium and it hurt us in the long run. Because our team had such a steep learning curve in the early days we missed a few of our expected development deadlines. When these misses happened I got caught up in the details… Who was supposed to do this design? Why wasn’t this bug fixed? What do I need to do to help fix the issue? These were all good questions but not the one I should have been asking.

The question to ask yourself when you have a ‘miss’, is why. And, you ask yourself that question 5 times to get to the root cause. Say it with me now… Why, why, why, why, why? By asking why 5 times you’ll get to the root cause and be able to eliminate the cause of the miss. As you eliminate causes of misses you become efficient, quick, and a powerful team. Next time I’ll ask why much more often.

Communication Strategies

At SocialDreamium, even right off the bat, we were a global company. I was based in Milwaukee and my co-founder @davidabrahams was in Australia, along with our development team. Startups are difficult enough without this kind of geographic challenge. However, it worked in our favor because I did all my work on SocialDreamium after 6pm which is 9am the next day in Sydney.

Communication became an issue in my lack of schedule and consistency. Because both Dave and I had full time jobs outside of SocialDreamium it sometimes had to take a back seat, and this introduced variability into our communication schedule. I’ve now learned that having a consistent and scheduled communication strategy is super important. Until you get to the point that you’re talking everyday (and obsessed to the point you don’t want to talk about anything else) you should keep a strict schedule. Usually, if you’re making good progress 2 email conversations a week should suffice. However, email alone is not enough. You need to have another channel for daily updates. We used Basecamp for our project planning and communication and I would highly recommend that product, but like anything you have to use it to find the value from it.

Be Realistic About Team Core Competencies

Our team of developers was pretty strong. They could diagnose an issue fairly well and act on a solution. Where our team lacked skill was design. We could make things work but making them look pretty was tough for us. To be competitive and drive user adoption, interface design is mission critical. I should have spent more time researching (free material) on UI and layout.

To solve this issue before you have it, recruit appropriately. You wouldn’t hire college grads to consult CEO’s (or maybe you would) so don’t expect that you can do the design if you don’t have design skills. Make sure that you understand the needs of the business and product before you build your team. Another way to put this is, build your team around your product, not your product around your team.

Know Your Product and What Goes Into It

I didn’t understand the technology that was going into SocialDreamium. I still don’t. We decided to build REACH our flagship (but never launched) product in Microsoft .NET. Everything I read about .NET lead me to believe that it was old and that finding talented “social web-ish” developers would be difficult. I was reassured that there is a large development community for .NET and because .NET web development was our teams core competency we were in a good spot. To be honest with you, I still don’t know what the right answer to this was.

What I did learn is that if I’m going to try and start a company where we build houses, I better understand the wood, the brick and the morter. I need to understand what it takes to build a damn house even if I’m not the contractor. It’s absolutely my responsibility to understand the resources that are going to go into my product and business. I don’t expect to be a developer, but I sure do need to understand our information architecture and how one language over the other will affect speed of development, scalability, and anything else that will affect our business processes.

Can you really compete?

Don’t just make a 10/20/30 pitch listing your competition and think that that is enough. It’s not even close. This mistake, I think, is the largest one that Dave and I made in the process of starting SocialDreamium. We knew who our competitors were at the point of launch but we failed to think about who else might be our future competitors. We also failed to analyze if it was actually possible to accomplish what our competitors could accomplish with the resources we had. Startups compete with giants like Microsoft and yes, even Google all the time but sometimes you have to realistically look at the likelihood for success when your “out-resourced”.

The 2 issues were future unexpected competitors and being out resourced.

1. Our future competitor that was unexpected was Seesmic. They developed the Seesmic Desktop and I was honestly blown away. It was so much better than Tweetdeck (another known competitor) and it literally took the wind from our sales. They were extremely well funded, already had tons of press, and the launch was enormous. Their feature set match ours so closely that it was scary and it was our own fault for not being able to get something out sooner in order to compete.
2. Being out-resourced will always be an issue for startups. But in order to overcome this issue you need to make up for it in some other way. A new revenue model, a feature set that is extremely innovative, or a marketing campaign that can change the game (GoDaddy).

Be Honest with Your Passion

This is a lesson I learned without making a mistake. You have to ask yourself, why am I getting into this industry? Having passion for the industry allows you to understand it, grow within it, and be innovative and competitive. I love studying why and how people communicate. I enjoy trying out all the newest tools to do so, and I love taking one form of communication (Twitter) and translating that into other forms (in person).

When we started SocialDreamium our goal was to create a tool that allowed startup community managers to grow groups of people around a cause or a brand better than anything they’d ever used. We loved talking about how people use Twitter and Facebook and blogs to reach people and engage them. We had a solid understanding of the space and where it needed to go. We created a product POC that was killer and that could’ve been a game changer. Our issue was not our passion for the space, our issues lie in the above lessons learned.

I hope that you’ve learned something from my mistakes. Learning from others experiences is so important in entrepreneurship. Here is another great example of a startup post mortem that you can learn from. Don’t stop learning, and don’t stop daring to make mistakes.

image via PieterMusterd

This struggle also ties back to the motivation behind my other blog ActionsTalk. Often times I find myself discussing ideas, learning how to implement new ideas, and working to further develop those ideas but not as often do I find myself acting on those ideas. Maybe action is the significantly more important piece.

The example that comes most easily to mind is a web app. I always seem to have great ideas around new web solutions for all kinds of different life and business problems but I much less (almost never) find myself trying to develop (in the coding sense not the growth sense) these new ideas/applications. In this scenario I often question if I’m spending my time wisely. Just because I’ve read about hundreds of start-ups, tested hundreds of start-ups tools and apps, and could easily tell you all the do’s and the do not’s of starting a start up company doesn’t mean I’m any closer to starting one.

Paul Graham’s conclusion in the article was disturbing in that I’ve spent a lot of time trying to understand many of the how’s and what’s of the start-up process such as how to obtain funding, how do I choose a language and what are the capabilities of that language, and what are the most profitable idea industries. I haven’t spend as much of my time learning the languages, writing the code or actually “creating” anything. Paul’s contention is that you don’t need to know “business” to succeed in this process. You don’t need to know the process before you dive in. Well I’ve been spending much of my time on understanding and learning the process. If Paul is right, then that’s scary.

Maybe it’s time I stopped worrying about the start up industry. Maybe it is time that I pick up that PHP/MySQL book by my bed that’s practically unopened and begin to dive into the doing, the coding, the ever so important creation phase of this process. The learning will not stop it will just change. Now I believe the learning will be more applicable and a bit less theoretical.

Anyone who has gone through the process of transitioning from “reading about” to “doing”, I would love to hear your feedback on the experience and what conclusions you drew on Paul Graham’s theory.