We began working in January of 2014 on Levaté, an accessory product for wheelchair users to help improve their independence. It'll likely be three full years before the product is ready to be manufactured, about a year and a half behind our original, optimistic schedule. We've slowly learned that developing a new product and launching a business around it takes longer than expected. Double any initial estimate of time and money cost.
Being in a pensive mood as I mulled over what we'd learned in the past thirty months, I began thinking about the broader lessons for my life. This is the list I came up with.
"I just don't think you all are going to make it. You're not in wheelchairs yourselves, so how can you know what a wheelchair user wants?"
That was the gist of what a visiting oil and gas entrepreneur told my business partner about our social business startup, which as you can probably guess, aims to create innovative products for wheelchair users.
The problem with his statement is that if true, it completely invalidates the field of social entrepreneurship.
I don't think he was right. As I'll explain, social businesses work because they have the same engine under the hood as a traditional business: a way of bringing in revenue in a repeatable and scalable fashion from customers, or a business model. I'll also explain how, with the right mindset and methodology, social businesses can thrive even without being their own customers.
You can scratch other people's itches too
But first, let's talk a bit about why we hear this oft repeated advice so much. The writers of Rework, Jason Fried and David Hansson call it "scratching your own itch". Generally, this is great advice. If you're your own customer, figuring out how to make your customer happy starts with making yourself happy! As Fried and Hansson point out, for example, Nike was started by a track coach who wanted better running shoes for his team.
Heavenly Bread: A Social Business Case Study
Social ventures can also be a great example of this. Heavenly Bread, a social impact bakery in Tulsa, Oklahoma, had a dual-fold social mission. The first was to provide fresh, nutritional, and preservative-free whole-grain bread to the community. The founder loved her bread and wanted to share it with the community- she is a perfect example of her own customer in this sense.
But let's look at the other side to her social mission. Appalled by Oklahoma's exceedingly high rate of female incarceration (the highest in the nation, in fact) and the difficulty of reintegrating into society after incarceration, she decided to have an open employment policy. And in fact, her first employee was a formerly-incarcerated woman. Let's call her Jane.
While technically the founder's employee, from the perspective of a social business, Jane was receiving a service from Heavenly Bread. Heavenly Bread gave her a job when nearly no-one else would have. The company was attempting to provide a certain segment of the population (formerly incarcerated women) with a socially-impactful service (a steady job they likely couldn't get anywhere else, and without which would likely return to jail). Having never been jailed, the founder was not a member of this population segment.
Despite not having lived the same experiences as her formerly-incarcerated employee, the founder was successful in providing the service to her. After perhaps a half year of working with Heavenly Bread, Jane successfully transitioned out of her job there and into a new company. She likely wouldn't have been able to gain the job without her experience at Heavenly Bread, which helped Jane psychologically transition back to society but also gain the post-prison work experience a potential employer would want to see before hiring her.
So here we have one company that has elements of both kinds of organizations. They are their own customers from the bakery side, but like many social businesses, they also tried to help improve the condition of a distinct segment of the population of which they were not a part.
Build products your customers want to buy
The goal of any new business, social businesses included, should be to find paying customers as soon as possible. This is the feedback mechanism that makes businesses so agile. If you think about it, when a customer gives you money it means that they think the product is valuable enough that they would spend their hard-earned money on it. Suddenly, you don't need to be your own customer- you have successfully scratched the itch of someone else. There are follow-up questions to ask (how many customers are there out there? Do you make enough of a margin off sales to cover costs and expand?) but you've done what is without a doubt the hardest part of starting a new organization: creating a solution people are willing to pay for.
Social impact non-profits may be able to stay afloat from donations, but the point of a social business is that the organization can, at the least, become financially self-sustaining through customer-generated income. If you don't have an effective solution to your customer's problems, you're going to find it out very quickly when no one buys the product. And those who do buy the product will gladly tell you what they really think about it because they've got skin in the game- their money. When I work with startups, I always tell them that feedback from paying customers is the best, hands-down. Otherwise, people will lie through their teeth to you about your product to not hurt your feelings.
Getting to the point of paying customers
Getting to a sale (or even a paid beta) is a huge milestone for a new business. But how do you get to that point? And as social innovators scratching someone else's itch, how can we collect quality feedback when we're too early stage for revenue and thus lack that as a feedback mechanism?
The answer: rapid, experiential prototypes tested with a scientific method.
This will be familiar to Agile or Lean Startup practitioners. This section is designed to explain why these principles are important and show some examples of them in action.
Rapid. No one builds the perfect product right from the beginning. The product always changes as it goes from idea to reality- so we want the cost to change to be as low as possible. There needs to be a focus on quick and rapid prototypes so that as we learn new information, it's as easy as possible to build the next version of the prototype.
The faster we build and test simple versions of the product, the faster we learn. The faster we learn, the faster we can adapt to what works, and the sooner we can get to a working solution. The quicker and dirtier the prototypes, the faster you move and the less time and money you waste. Want to know what some of the first prototypes were for the wheelchair lift my startup is developing? Stacked pallets in one case and stacked reams of copy paper in another. You can't get quicker and dirtier than that.
Scientific. We want to build our social ventures on a solid platform of objective data. This means being able to isolate variables and collect data so that as we build our prototypes, we know what is and isn't working and what needs to be changed.
Business plans, a necessary evil, are usually just a collection of guesses about how we think our business, industry and market will perform. Once you start building rapid prototypes, you can take some of these hypotheses and test them to see if they are actually true or not. Really what we're trying to get at with our rapid prototypes is, before we even launch our product or service, how can we prove objectively that we're building the right product?
In the case of the pallet and paper prototypes of the wheelchair lift, we needed to know very early on if wheelchair users wanted to be lifted from the seat while the chair remained on the ground, or if they preferred to have their whole wheelchair lifted with them. So we stacked copy paper under their seats to test the former, and lifted them onto pallets to test the latter. In a day's work, we learned an important insight about how the product functioned that might have wasted months of time had we tried to mimic the actual lifting technology. In this case, all the wheelchair users we worked with preferred to have their whole chair lifted. They felt more stable having the entire wheelchair lifted with them.
This is the core of the Lean Startup cycle I teach in classes and workshops: A hypothesis you need to validate, the experiment you'll validate it with (a quick prototype and metrics to judge them by) and actionable insights. I say actionable because if the results don't change your behavior in some way, it's a bad experiment! Also, many people start with the prototype they want to build and come up with a generic, unspecific or unusable hypothesis as an afterthought. This is backwards, and results in experiments that don't actually put the hypothesis to the test! It's imperative to decide what you want to validate first, and why that's important to know (in other words, how it changes your behavior). Having decided that, you can design your experiment and prototype.
Experiential. I take experiential to mean two things: Experiential prototyping as a process that incubates empathy, and experiential prototypes as a type of rapid prototype.
Let's talk about the process first. By making the prototyping and product development process as experiential as possible, you're empathizing with your customers. In a social business in which you're not your own customer, the more you can empathize with your customer and understand their fears, motivations and desires, the better a solution you can design for them. This is really the core of the Human-Centered Design movement: you're tearing down the veil of "otherness" that separates the product designers from the product users.
In one great example of how to do this, Nordstream tasked their innovation team with developing an app that added value to the sunglass shopping experience. The entire team set up shop inside a Nordstrom store, in the sunglass department. The whole team interviewed until they had a decent idea of what the app needed to be. Then the coders, working at desks they set up around the sunglass displays, coded it in front of their potential users. They could build a working version and immediately turn it over to have it tested. While they were working on the first running version, the rest of the team used sharpies and copy paper to build mockups they could test with customers. That way, the programmers knew exactly what they would build in the first version. I highly recommend watching the video as it's a great illustration of all three of these principles at work.
Other ways to empathize more with customers:
These are just a few ideas, but hopefully they spark some of your own!
You can also make an experiential prototype as a type of rapid prototype. Let me give you an example.
A startup I worked with called Park Ave wanted to build a marketplace for buyers and sellers of parking spaces during special events like sports games and concerts. They had already started building the app, but before they sunk 6 more months into developing it they wanted to know if there was actually a market for it. So they went out that weekend and spent two days at a baseball game series, talking to potential customers trying to sell them a parking spot for the next game in the series.
Notice that while they're not testing the technology (the app that would take months to develop), they are still in fact testing the value proposition of the app (that parking at special events is enough of a hassle that users will pay to reserve a spot in advance). They're testing the experience of using the product. Almost no one cares how whiz-bang the technology is, they care about if the technology makes them cooler in some way. So the most effective rapid prototypes are also experiential in that they get at the root of how the users would feel using a product if it actually existed.
After all, people use products because of how it changes their experience of the world. Entrepreneurs, even social entrepreneurs, tend to equate the value proposition of their product with the product itself, or with its features. That's only half the story. The value proposition is what the product does and why that's important to the user. Does it save them time or money? Does it make them feel cooler or more heroic? It's the experience of using the product that counts- not just usability, but also how the user's experience of the world changes through using the product.
In Park Ave's case, they learned through 3 to 4 cycles of week-long tests that there was not in fact a market for this product. They then pivoted to a new product. Their new idea resulted in a $10,000 paid beta with a major state university, which they are currently in the process of conducting. The point here is that they avoided 6 months of useless programming and product development and learned through a few weeks worth of rapid, experiential prototyping that their product wouldn't succeed. Instead, they're spending their time building something they know their customer wants because they've already been paid for it.
Generally, it's a good thing to be your own customer. Assuming you're a decently self-aware person, there's no customer discovery to be done.
However, this advice shouldn't be taken to the extreme. Social businesses can, and do, succeed and thrive even in situations where the founders aren't their own ideal customer and are scratching someone else's itch.
Because social entrepreneurs use business as a vehicle to deliver social impact, finding paying customers is the ultimate validation that you're scratching the right place and the itch is going away. The key becomes getting to that point, perhaps even in the form of a paid beta or preorders, as soon as possible.
Agile and Lean Startup methodologies are crucial to getting your social business to that point and beyond. Namely, social entrepreneurs should aim to validate their critical assumptions about their business and customers by using rapid, experiential prototyping to test what works and what doesn't work quickly and cheaply, all while building an empathic understanding of the customer's fundamental experience of life and resulting trials and vicissitudes.
Dillon Dakota Carroll
I think crowdfunding campaigns are wonderful. Entrepreneurs, artists and creatives can use a website like Kickstarter to get projects funded that might otherwise have neer seen the light of day, or to take preorders to derisk a new product. The success stories really are astounding: The Coolest Cooler got over $13 million, the Solar Roadways project raised $2.2 million, and the Soma water filter creators published the famous article "Hacking Kickstarter: How to Raise $100,000 in Ten Days".
Still, the chances of success are slim. Of all Kickstarter campaigns launched, about 40% are successful. Of those, 70% raise less than $10,000. Few have the runaway success we've seen in the previous examples I've mentioned.
An unsuccessful campaign is a huge time sink. If your campaign is 30 days long, the Kickstarter can easily turn into the only thing you focus on for those 30 days, plus the several weeks of preparation before the campaign even begins.
That's what happened to us. We ran an unsuccessful 40 day campaign. We were trying for $30,000 and made it just shy of $14,000. With at least three weeks of preparation leading up to it, we easily sank two months trying to make it work. While it wasn't the only thing we worked on in those two months, it was certainly our priority. We also wouldn't call it a complete failure- we made many connections from our initiative that might pan out in ways we don't expect. Regardless, we didn't reach our funding goal, which we really would have liked to do. We did learn a few lessons from our campaign that we want to share.
5 Lessons from our failed Kickstarter Campaign
This article isn't meant to dampen anyone's spirits or enthusiasms for a Kickstarter campaign. Instead, we hope to give you a balanced view and share our experience so that you can make a better decision about whether a crowdfunding campaign is the right strategy for your venture at its current stage.
Feel free to share your thoughts, comments and experience with us!
Dillon Dakota Carroll
I'm writing this blog post from Peru, where I've spent the last week and a half. I flew to Lima, the capital, on the 13th of November 2014, and I'll be flying back on the 13th of December 2014.
Ah, what am I doing here, you ask?
Lots of things.
It started as a family vacation to hike the Inca Trail to Machu Picchu. In fact, I'm in Cusco now with some of my family. In two days we'll take a bus to the trailhead and hike some 25 or more miles over 4 days to the famous fortress in the Andes Mountains.
To get a better deal on the rewards ticket to Lima (I think my roundtrip ticket cost about 50k miles and $75 in taxes), I was going to have to stay in Peru longer than my family anyway. So, I decided to make a longer trip out of it and test a couple of personal hypotheses I have.
Hypothesis #1: I can work remotely on my Levate to-dos effectively, efficiently, and without interruption in the amount or quality of work I can do.
Hypothesis #2: I can give entrepreneurship workshops abroad and get paid to do so.
I'll talk more about each of this later. But first, I can hear you ask, I thought you were trying to save money?!? Something doesn't jive, amigo!
Yes, you are right, I recently ran a month-long experiment where I took great pains to limit my expenses. And yet, here I am in a foreign country, and the only thing that's truly expensive about it is the fact that I'm paying $459 in rent for an entire month that I'm not at home. The flight cost me $75, the tours and trip to Machu Picchu were already paid for by my very generous father (who I am lucky to have- Love ya, Dad!), I'm using couchsurfing to stay with new friends in Lima instead of paying for a hostel or hotel, and food (particularly in grocery stores) is inexpensive here. So using the same frugalness I used in October, my $1,000 a month goes much further in Peru than in the US.
With all of my moving around, I also took great pains to pack as light as possible. Everything I brought fits into a standard size backpack and a satchel. In case you're interested in my packing list, you can find it here.
So, into the hypotheses I was testing for this trip. I wanted to treat this trip, or rather the part of it where my family isn't here, like an experiment. If the experiments went well, well, the idea is to try and do the same thing on a more permanent basis. In other words, move out of my apartment and spend a few months in different places around the world, giving entrepreneurship workshops and working remotely on my startup with my business partner Ethan.
So first, let me talk about what it's been like working remotely. I needed to make sure I had reliable access to decent wifi, and a way to make phone calls to the US.
I figured the phone call part out pretty easily. With a netbook, smartphone, headset with mic, and skype subscription, I can basically call anyone I want. Skype has a plan where you pay $15 a month and you get unlimited calls from your skype account to landlines and cell phones around the world. Even cooler, the first month is free. I can reach out to anyone I ordinarily would in the US, just routed through a wifi connection and connected to their phone line.
The complicated part is that no one can call me, unless they're using my skype account. If or when I do this again, I may look into purchasing a Skype phone number. Like a regular phone number, if someone calls that number, I can answer it anywhere I'm connected to my Skype account. Pretty slick, and from what I remember it is reasonably priced. I could even have my cell phone number route to my hypothetical Skype number, I imagine.
What I'm missing out on here is the face to face interaction with my connections and especially with my team. A phone call or video call can never compare to sitting across a table from someone or shaking their hands. That's ultimately part of the price one pays for working remotely. And I do hate leaving my partner, Ethan, to take care of in-person meetings on his own.
Thankfully, there's only an hour time change between Oklahoma and Peru. I do have to be careful about keeping track of that hour time change, but I can only imagine that it would be much more complicated to coordinate meetings and such as the time difference gets bigger.
So far the wi-fi situation has been a mixed bag. In the hostel (I stayed in one for the first two nights) and homes I've been staying in, the wifi has been consistently good. That makes working from wherever I'm lodged quite convenient.
On the other hand, there doesn't seem to be consistent wi-fi access in cafes like in the USA. Some public places, such as parks or shopping centers have free public wi-fi, but the quality is spotty at best and they all seem to require you to log back in after 15 minutes of using it.
I have been visiting a couple coworking spaces in Lima, trying to set up workshops (more on that later), and one invited me to use their space while I'm in Lima. Their wi-fi was excellent. This makes me wonder if I could hop from coworking space to coworking space, giving workshops and using the spaces to work remotely for a couple weeks at a time before moving on to a new coworking space. Because of the camaraderie among startups and entrepreneurs, I imagine most spaces wouldn't mind. Especially if I'm already giving workshops there for their occupants.
So far, I've given one workshop here on the Lean Startup validation cycle, and I have a workshop on Agile methodologies lined up for when I get back from the Inca trail and Machu Picchu. I'm doing both of these free of charge. Getting paid for them would have been nice, but it seemed most important at the beginning to build experience as well as a network first. I'm trying to arrange paid workshops with two coworking spaces, Comunal and Stars Camp.
The first workshop I gave went well. You may be interested in how it came to be. Well, I knew no one in the Lima entrepreneurship community before this workshop. I spent a few days sending around a ton of cold-emails to organizations I found online. One of my emails got forwarded to the director of EmprendeAhora (Innovate Now in English). As it turns out, November is Lima's entrepreneurship month, and the Director, Romina, wanted me to do a Lean Startup workshop for some of the old graduates of the program. After setting up this workshop, I asked her if she could connect me to anyone else she thought might be interested in having me put on a workshop. She connected me with Arturo, which led to the Agile workshop I'll be putting on, as well as the connections with the two coworking spaces I mentioned.
By the way, I was very impressed with the state of the business my students had. All of them had paying customers, which is awesome! That is typically the hardest part for anyone starting their own business.
These workshops I'm giving are all in Spanish. I'm pretty confident about my Spanish skills, but there is definitely a world of difference between shooting the breeze with friends and teaching a workshop. So while my Spanish was shaky for this first workshop, I hope to continue improving on my ability to deliver the content and lead the exercises in a foreign language.
So far, the feedback has been assuringly positive from the workshop, including in the anonymous survey I sent out after the workshop ended. I did discover a lot of things I could have done better personally, which coincided with the constructive criticism I've received from the students and Romina, the organizer. For example, I did not do a good enough job explaining and framing the mock interview exercises, and several of the students were confused by it as a result.
I'm feeling very positive about my chances to get at least 1 paid workshop set up with one of the coworking spaces. By the way, some of the next posts I want to do will be about the coworking spaces I visited. They were both quite interesting places, with what seemed to be quite successful and functioning communities. As I travel more, it will be interesting to compare notes on the different coworking spaces.
What else is there to say right now, as we wait to go hiking to Machu Picchu?
Well, the food's amazing. Really fresh seafood, and a wonderful spin on food adopted from other cultures. Peruvians have incorporated their unique flavors into fusion Peruvian-Chinese (called "Chifa" in Peru) and Peruvia-Japanese food, and have even given a Peruvian spin to dishes like sandwiches and burgers.
Despite how crazy the drivers are in the crowded Lima streets, I have been quite pleased to have connected with a ton of open, fun, and amazing people while I've been here; both through the workshops I'm giving and through Couchsurfers. In fact, I went with some of my new friends to take surf lessons on the beach in a town about 45 kilometers to the North of Lima, called San Bartolo. We paid $15 each for lessons that lasted almost 2 hours in total. It was the first time I'd been surfing, and it was a blast. We finished the day eating seafood on a terrace overlooking the beach, laughing and chatting until the sun went down.
A Peruvian family I stayed with for 3 nights, and who invited me back to stay with them once I return from the Inca Trail, showed me all around the historic center, the Lima Zoo, and the Larco Archaeology Museum. I went with other new friends to a wonderful free concert series called "Patio Abierto", held on a stage behind the National Museum, where I was introduced to some fantastic new bands like Las Cantautoras, Quasar, and Colectivo Circo Band.
The past week and a half in Peru have felt formative, to say the least. Now I'm off to hike the Inca Trail.
Until next time,
Dillon Dakota Carroll
...sees much and knows much