When Brands Differentiate – A View on Bags, Bag Brands, and Brand Differentiation

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One of the topics I enjoy researching is brand differentiation. It’s amazing to see how much creativity is put into helping brands stand out amongst their competitors. In order to illustrate the point, the podcast below explores the differences between messenger bags and the rest of the industry, and how four brands have managed to carve out a name for themselves amidst tons of international competition.

One point I’d like to add is that the purpose of this podcast is merely to illustrate how the companies have differentiated between themselves amidst of sea of competitors, and highlighting how they’ve implemented this differentiation across the company and branding.

This podcast highlights the need for differentiation if you want to enter a crowded and established market.

The companies I talk about during the podcast are:
missionworkshop.com/about/
info.rickshawbags.com/the-rickshaw-story
www.timbuk2.com/content/about-people.html
www.chromeindustries.com/us/en/manifesto

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New Beginnings from Old Ends

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Originally posted on TheNextWeb.com – 5/19/14

I’ve been fortunate to have been part of over one hundred founder’s journeys from developing their initial idea to raising investor money for scaling, and as such, several of these founders shared with me their stories in order to help put this blog post together. Some of the most inspiring stories have been those where the founder has persevered to overcome difficulties with their original idea, but equally inspiring have been those stories where a pivot has led to something new and better than the original idea. As such, the focus of this blog post is to explore some of the thoughts that come into play when considering whether to persevere with something or pivot onto something new, and what can sometimes stop us from doing so. 

In the words of Albert Einstein – “Insanity is doing the same thing over and over again and expecting different results.”

One of the most powerful quotes on the subject of moving onto new things, comes from Seth Godin’s book called ‘The Dip’: 

Extraordinary benefits accrue to the tiny minority of people who are able to push just a tiny bit longer than most.
Extraordinary benefits accrue to the tiny majority with the guts to quit early and refocus their efforts on something new.
In both cases, it’s about being the best in the world, about getting through the hard stuff and coming out on the other side.

On New Beginnings

If you knew that by changing one aspect of your project, or moving onto a new project (leveraging the experienced you gained working on your current project) would be better for you, would you do it?

One of the best stories out there about how a tough time was made into a success is the story of Twitter.. it’s best to simply watch the video and hear it directly from one of the early employees, but suffice it to say, the founders are much better off for having made that leap of faith onto what has now become Twitter.

The question is, what can you do to predispose this kind of thinking and/or kicking things off in the right direction from the beginning? Let’s start from the top…

On Starting – Being something for someone, not everything for everyone

Positioning is an oft-ignored concept that gets lumped into ‘general marketing’ and isn’t thought of as a starting point for defining value to your customer as well as your company’s strategy. Positioning, in summary is about thinking how your company sits within the mind of your potential customer and the overall market. 

In ’The Dip’, Seth Godin talks about how if you cannot be ‘the best’ then you might consider the incremental benefits of persevering down the path you’ve chosen. I propose, for the purposes of early stage startups, that what Seth meant by being ‘the best’ could be restated as ‘being appropriately and distinctly positioned within the mind or circumstances of your target audience’. 

If from the start of your company’s launch, a customer sees value in what you are offering because no one else offers it, then by default, you ARE the best option. Thus, ‘bestness’ can be achieved both by either entering a market that already exists and with a new proposition appropriately positioned in a way that ‘bests’ all of your competitor’s offerings, OR by create a new market to satisfy the latent needs of customers and creating a new ‘best’ category for yourself.

If from the onset of a new project or business you cannot conceive on how you can either push through the necessary work to be the best in an existing category, or appropriately position your value proposition as a new type of offering to a target customer, you might want to continue refining your ideas until you reach one that has a clear value to a clear group of users that will see you as ‘the best option’ for what they need. Anything short of that, and you start running into differentiation problems against established competitors. As a starting point, on my blog post on the product market fit cycle I talk about how you can integrate the concept of positioning into part of your company’s ongoing analysis.

During – Knowing what you want

Just being the best or differentiated from your competitors isn’t always enough. If you don’t know what you want, how will you know if you’re getting it (or not)?

Having a strong vision of how you want to operate your company and how you want your company culture to develop, matters. It matters in helping align all employees around a cause, around a work ethic, around solving something for someone that they fully understand. It allows you to make decisions about the tone of your company when speaking to your customers and employees, the quality and nature of your products, and what’s sufficient for you to consider a product experiment succesful.

The best talk on the web about this very topic is Simon Sinek’s TED talk on the subject.

Define what you want and why you want it, anything short of that will lead to you and your team being pulled in many different directions constantly.

On Ending the benefit to quitting at the right time

Let’s say that you’ve hit a plateau in growth or exhausted your ability to find a segment and/or beachhead for your company to target, one potential solution is that you start compromising on your original vision.. Perhaps you wanted to have a certain type of service offering or a specific customer, but by having to address a different segment or customer your personal goals are compromised. For example, lets say you had a social cause in mind, but the only way you could get your idea to ‘work’ is by moving to a non-social cause. Will your heart be in it?

If this happens, now what?

Well, time and resources are precious, wether we are talking about life or startups. By shifting your focus of energy at the right time onto a new project or by altering the one that is not working, you free yourself up for a new victory rather than perpetual stagnation or worse, failure.

So if you’re in a situation with a product, feature, or company where it is clear that persevering could merely create a waste of resources usually in the form of time and money and frustration for all, it might actually be better for you to quit and attempt something new, or ‘pivot’ one aspect of your customer to positioning/product/go2market relationship.

By quitting early, you don’t waste energy going down a path that is inefficient and leading you nowhere and opens the door for new beginnings and new ideas.

Paralysis – But why do we sometimes NOT quit?

So, if there are clear benefits to quitting when it is clear we are going nowhere with an idea or project, what generally stops us from doing so? 

Below are some reasons why we don’t budge when we should:

1) We Sweat Sunk-Costs too much – The IKEA Effect
 
Quitting or just giving up on something is a big word. It comes with lots of social stigma. We’ve been brought up in the west to ‘never quit’, to persevere at all costs. We are taught by society that quitting is what losers do and isn’t respected. Unfortunately, this mentality can create a myopic tendency to arguably stick with things way beyond when one should. Those accomplishments or efforts that we sometimes hold on to as barriers to moving on to new things are called sunk costs.

Sunk costs can come in many forms, you might be overly invested to what others may think of you if you quit, what your family might think, etc. You might fall in love with an idea or product too much, or you might have beliefs about commitment, perseverance and not letting anyone down.  

A version of sunk costs is the ‘IKEA effect’  whereby we value things more if we’ve put in effort. 

In the words of Nik Brbora, (a Clipper Round The World sailor and Chief Software Engineer for Seedcamp company Saberr): “The IKEA effect basically says that once you build something yourself you love it a lot more and place disproportionally high value on it. Even if it is not as good. You built it and so to you its way more awesome than to an outsider. By some factor. So if you are building a startup or a product you typically accumulate some value, be it the time invested or the knowledge about paths which don’t lead to product market fit. To you this value is way higher than to an outsider because you built it. To quit would be to face loss of this (to you) huge value. And that hurts disproportionally more than when compared to the outside market value of that gain. So what you need is a disproportionally high-value event to justify quitting.”

Having something fail doesn’t necessarily have to be a massive failure, it all depends on how big the attempted experiment was in the first place. One way to avoid building up too many ‘sunk costs’ is by taking smaller bets. For example, if you were trying out a new business idea, service, or feature, it could be that you ‘quit’ the market segment you are targeting, and you target a new one (the classic ‘pivot’)… 

In his book titled ‘Little Bets’, Peter Sims talks about how by not over-committing on massive projects from the start, you can cycle through ideas and innovations far faster and at a lower cost. This concept isn’t new, and any reader of the ‘The Lean Startup’ by Eric Ries will recognise the concept. However, it’s worth noting that many times we forget to think of ‘little bets’ in all aspects of our attempts, be they marketing, communications, or even a new sport, not just when it comes to product development. 

One side benefit, naturally, of accumulating these little bet ‘failures’ is that your experience and ability to adapt will grow stronger and when you do find something that works, you will be that much better at dealing with it.   

2) We fall subject to The Loss Aversion & Endowment Effects

The Loss Aversion Effect is what makes us prefer preventing a loss vs potentially gaining a higher gain later. It is one of those irrational quirks that makes us human. This is why trial periods work, you fall in love with something during the trial period, and then fear the loss more than the gain you would have by passing it up for something potentially better in the future. This effect is the reason why many hold on to stocks or their failing startup for longer than they should. Other good resources on this include Dan Ariely’s YouTube lecture on the subject and this Psychology Today article on the subject.

The Endowment Effect is proximal to the Loss Aversion Effect and the IKEA effect, but basically its about how we value that which we have far more than what we don’t have. Literally, we think it is worth more than the market pricing would give it just because we own it.
 
3) We actually don’t really know what we want, so we don’t really know if we are getting it.

As I mentioned early, from a strategic point of view, knowing what you want is such an integral part of actually achieveing it. This may sound absolutely basic, but its very easy to just get carried away with whatever others think and not really mentally commit to what you personally value and set out to do from the start. 

This ‘vision’ you should have isn’t necessarily about having specific clarity on how something plays out, as no one really knows what the future will bring, but rather about focusing other variables.. such as, what kind of company culture you want to have or what type of customers you want, or what kind of products you are passionate about.. the choices are endless, but you do need to start be defining what your vision is otherwise success starts becoming a moving target and moving targets make it hard to know when you’re failing.

In the video I mentioned earlier, about how Odeo.com became Twitter, you can hear (at time 0:50) how very people people in the company were passionate about audio, and how for sure that probably influenced their ability to connect with their customers.. audio just wasn’t part of what they lived and breathed and therefore, not really likely to help them make decisions clearly for an audio customer.

From a more tactical point of view, defining milestones and KPIs for success can help you get a feel for whether a hypothesis you are testing out is met. By defining some milestones up front for your company  you can track your expected progress more tightly, rather than constantly letting things slip and not having clarity as to why they may be slipping.

4) We are too busy believing other people’s stories – The Bandwagon Effect

In the words of Gabriel Hubert from Seedcamp company Nitrogram  “I think some founders don’t quit because they’re still too influenced by perceived “success” or progress of others, etc…  Companies are rarely doing as well as they say they are, and founders should beware of attending too many events that only encourage them to listen to these stories.” 

We are subject to falling victim of the bandwagon effect  whereby we want to be like others. If other startups say they are ‘killing it’, you want to believe you are too.. even if that’s not entirely true. Fight your own battles, but know why you are fighting them and when you should reconsider.

5) We are fearful of what will happen and if anything better will come

The last main reason why I believe many are unwilling to quit is because we are afraid about whether anything better will come along after you move past your current project. Perhaps the product you built is so beautiful, the culmination of what you thought you could make, could you make something better? The people you are working with, could you build a better team? The idea you have, could you come up with a better one? The money you raised, could you raise again with a failure under your belt?

Ironically, in some recent studies around happiness, it turns out that there are a couple of tendencies that play in your favour. Apparently, how you feel over time, is inherent to your predisposition towards life. This is called the Set-Point theory of happiness  In other words, if you’re a positive person, if something negative happens, with time you will rationalise it, integrate it into your life, and after some time, your life perception will return to how you were before. According to the theory, basically, no matter what you fear will happen, your perception of the eventual outcome after a time, will be no different regardless of the positivity or negativity of the outcome, it all depends on how you, as a person, perceive life to start with. If you want to read about this more, another definition for this is the Hedonic Treadmill.

So, if ‘time neutralises all wounds’, so to speak, would you be that much more willing to give something a shot?

After a Transition – Your Recovery Network

In the past, I’ve discussed the benefits of networking for the purposes of helping you develop your company and find the right people and opportunities. However, it also has a hidden benefit.. networking is your post-transition safety net. People that are open to meeting new people and do so on a regular basis are more likely to see identify new opportunities and are also more likely to have the very people they interacted with during their previous journey help them out in recovering. 

It is pretty common to have CEOs of companies that have moved on to other things become employees of other startups, or go on an start a new company and have many of the people they met in their journey back them in their new endeavour. One of the things we have seen time and time again in a close knit group of companies such as Seedcamp s, is that because of the nature of how founders get to know each other, is that they transition to other startups within their network, effectively providing them a safety blanket of options from being in the same network.

In Conclusion

1) Understand what your vision is and what success means to you
2) Understand who your target audience is and what being ’the best’ in your category means to you and them    
3) Take smaller bets, which can fail, but won’t over-compromise you or your resources
4) Quit/Pivot when you see the signs of not being able to ‘be the best’ in your selected segment after your time goal has passed
5) Acknowledge the emotions that come with quitting, but know that whatever crisis you are going through, it too will pass
6) Never stop building a network, this will be your net – keep them posted on progress, ask advice, and notify them if you are moving on. If you’ve been talking to mentors and investors and other startups and given to the community, they will remember you and help you out.

A big thank you to Nik Brbora (a Clipper Round The World sailor and Chief Software Engineer for Seedcamp company Saberr), Gabriel Hubert from Seedcamp company NitrogramShawn Zvinis (read his startup’s post mortem here), Ben Wirtz (read his startup’s post mortem here), Tomaz StolfaSarah Nadav  and Louis Chatriot for their feedback and input in writing this post.

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Creating a Brand that Lasts a Lifetime

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In my last post on “Understanding The Vision in a “Visionary Founder” I tried to tackle the softer side of what an investor looks for, and as a continuation of the thread, I want to try and tackle how that vision evolves into a brand and brand culture and brand positioning.

Last night, I had the chance to watch the movie ‘Bones Brigade: An Autobiography’, about the lives and histories of many of my childhood skateboarding heroes… including Steve Caballero, Tony Hawk, Mike McGill, Lance Mountain, Rodney Mullen, and several others who were all part of the Powell & Peralta skate team: the Bones Brigade.

As I relived those memories, I recalled how passionate I felt about the sport because of how these guys made it amazing and accessible at the same time. They invented tricks, such as the ollie, which democratized skateboarding for kids so they could enjoy skating on their streets rather than hoping to see a half-pipe pop-up in their neighborhood. On a personal note, I can remember as a kid wishing I could be part of the Bones Brigade and riding with cool pro-kit from my favorite skaters. All the skater kids in school had Powell-Peralta stickers and patches sewn on (typically by disapproving mothers) onto our backpacks. I even went as far as building my own quarter-pipe and ‘branding it’ Powell Peralta!

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Yours truly (many moons ago & with hair) launching off of my home-made Powell-Peralta branded quarter-pipe. I made it in shop-class.. in case you’re wondering, I got a good grade in that class.

However, with more adult eyes, what really impresses me now is the visionary machine that was Stacy Peralta (one of the two co-founders of Powell & Peralta) in crafting the Powell-Peralta & Bones Brigade brands that captured the spirit of skating in a way that lured kids like myself and my friends in to want to connect with it and live it.

Great brand lasts a lifetime.

As an observer and appreciator of great branding (the way some appreciate art), It’s amazing to see how, to this day, even long after its death in 1991 (the company fell apart due to a founder dispute) and recent rebirth (the founders patched things up by request of the team) the Powell&Peralta / Bones Brigade story stands out as an inspiring tale of a visionary founder that created an awesome brand and culture, and positioned it to stand out above and beyond the crowd of the other me-too companies of its time. The fact the Bones Brigade autobiographical movie came out recently and the brands have been succesfully reborn almost 20 years on from their heyday,  is a testament to how much the whole brand, and what it stood for, stuck with many of my generation.

It starts with a vision.

Stacy Peralta, helped create a brand and culture upon which he positioned the company in a way that resonated with his customers and led to Powell & Peralta’s success both in attracting the kind of riders that lived this vision to join his team, but also in successfully selling many skateboard decks to kids wanting to live his vision themselves.

As a bit of background, Stacy himself was a champion skateboarder and member of the famous Z-Boys (arguably the first skateboarding team in the world), and in many ways that helped shape his vision about what a team should be like, having himself experienced the eventual falling out and disbanding of the Zephyr team.

Stacy’s vision of forming a better team without the attributes that broke apart the Z-Boys, drove the engine that would come to power the Bones Brigade brand from the very beginning. In the movie, you can hear Stacy himself share his vision (at minute 8:53) about how he wanted to make a team that would last, and (at minute 7:40), you can also hear how his co-founder George Powell narrates  Stacy approaching him on the idea of building a team with a specific ethos, which eventually became the Bones Brigade.

To dig deeper, the brand’s development and success wasn’t accidental (although there were likely many many many failed experiments along the way)…  rather, it was through meticulous work that Stacy Peralta and his team developed a culture, tone, and imagery to communicate the values and positioning he wanted to convey for the brand, both externally and internally.

It was this hard work, as well as Stacy’s ability to inspire his team, that can be attributed for keeping the Bones Brigade together for as long as they did. In one part of the movie, you can even hear several riders struggle with various aspects of their success, but ultimately staying with the team for Stacy.  If Stacy had simply been driven simply by money (or an ‘exit’) he wouldn’t have conveyed the genuine care necessary to merit the loyalty of his team.

To showcase the point about how Stacy chose how to communicate his vision through his brand, in the movie (starting at minute 29:40), Stacy Peralta shares how his marketing campaigns, ranging from the burning of a car while the guys posed for pictures, and the crazy advertising style choice over the typical ‘action shots’ of the industry’s advertising at time, were chosen to cement the new brand’s tone and voice as different from the rest of his competitors that were pushing out bland ads in the magazines of the day. I’m not sure they knew ‘for a fact’ that these crazy ideas would 100% represent what they wanted to convey and convert into sales, but I’m pretty sure they knew that if they did what everyone else was doing, they’d for sure NOT be able to be different in the eyes of their customer.

From the Bones Brigade website:

Stacy recruited the skaters and handled marketing along with his longtime creative cohort Craig Stecyk III. Rejecting the expected action shot marketing, they used their young team to create esoteric images conveying the culture’s sarcasm and disenfranchised dark humor. While spitballing about his stable of skaters, Stacy commented that he never wanted to call them a “team,” a label that invited all kinds of jock baggage. Craig shrugged and simply said, “Bones Brigade.”

In effect, Stacy understood his customers and how to position his brand within the  skateboarding competitive landscape of the time, and he recruited those that shared his vision, including the Bones Brigade team of skaters along with artists like Craig to help him evolve and communicate his vision and branding strategy to make it stand out from the crowd. Stacy & George worked hard to recruit the right riders, work with the artists that understood the brand, hire staff to help them build it, and attract customers that lived it.

As with most companies, that’s not to say that all was rosy within the Powell & Peralta company. In one segment of the movie, George talks about the disgruntlement that some of his more senior factory employees felt at the fact that his young team riders were making upwards of $20,000 a month from deck royalties.. however, it seems that George & Stacy were able to at least convey the importance of the Bones Brigade for the company’s success and managed to convince their factory employees to stay so that things could carry on for the brand. In effect, sometimes not everyone will agree with your vision, but sometimes you need to made difficult decisions.

And continues with Positioning and Branding.

Even if at times he was merely experimenting, Stacy Peralta intrinsically knew that what would make Powell & Peralta and the Bones Brigade successful, would be to have a strong positioning and branding strategy to help them differentiate from their competitors and to help bring the industry into the mainstream (for more on the difference between branding and positiong, read this article).

It was this solid company culture stemming from a strong founder vision around building a winning team, a clear positioning strategy of being different, and a strong brand values that powered Powell & Peralta and the Bones Brigade brands to success, and it was their consistency in execution, ranging from the art on the decks to the arguably kitsch videos they created (such as the classic “The Search for Animal Chin“),  that allowed Powell & Peralta to dominate the skate scene during this era and to cement itself in the hearts of many kids around the world for many years to come.

In conclusion, as you consider starting or evolving a startup, give thought to what really drives you.. determine what’s your vision, and once you know the ‘why’ and who your customer is, then communicate it and your brand’s values and positioning with your employees and partners so that your product or service is consistent with everything you say and do for your customers. Potential investors know that companies that nail down their branding and positioning strategy company-wide, are that much more likely to succeed in the sea of competitive startups out there.

In case you are wondering why I choose skateboarding as an analogy for this post, it’s because I believe there are many similarities between startups and skaters:

1) Entrepreneurs, like skaters get knocked down many many times before they succeed, but they keep on getting back up.
2) Startup life like skate life is very much its own culture, operating at a different speed and risk level than others.
3) By having a movie that highlights some of the key points, if you want to hear them from the founders directly, you can simply rent it.

 

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Why startups need to constantly communicate with their customers

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Originally published on Oct 17, 2013 on TNW

A lot of entrepreneurs talk about optimizing their products so they run faster, look better, go viral – but it’s important to remember that none of this can happen unless you are constantly getting feedback from your most valuable asset: Your customers.

During Seedcamp’s recent U.S. trip, we met with many companies like Return Path, Erply, Zemanta, Percolate, OneFineStay, BarkBox, GrabCad, Pinterest, Airbnb, and RunKeeper, to name a few. The consensus from these conversations is that you must continually talk to your customers. Without doing so, you won’t be able to focus on what’s most important: Providing them the value you promised.

In concept, customer communication seems relatively straightforward. But in practice, everyone we spoke with shared that they all experienced varying degrees of difficulty.

Here are the two main reasons why it can be tough to continue listening.

1. It’s hard to tell who you should really please

As a startup, you have the pressure of fundraising and needing to articulate to potential investors a “big vision,” which in many ways can be an extension of your original value proposition. However, that can sometimes lead to an over-extension in order to give the appearance of not thinking too small.

The problem is that unless your customers validate your assumptions shortly after your successful fundraise, you may find yourself going down the wrong path to keep up an “appearance” rather than refocusing on what you know to be the real value to your customer. This may, in turn, burn valuable resources along the way.

It’s a tough call to make, but it is one that could literally cost you your startup if made too late.

2. Not everyone’s needs can be addressed

When you personally believe a product feature or functionality is what will provide value, you may suffer from self-confirmation bias rather than resorting to a real understanding of the needs of the customer. This could result in creating too many features that were requested by your customers (or yourself), thus distracting you from building on the core proposition.

When turning down feature requests from customers, you don’t always have to coldly reject the critique with a big “No.” Rather, as Jason Jacobs, CEO and founder of Boston-based startup Runkeeper suggests, think about whether their comments can be useful in the future, and tell your customers,”Not yet.”

But you still must focus on customer conversations

Continuing to listen is only half the battle. The first half is identifying who your customers are and knowing how to speak to them effectively.

Rob Fitzpatrick’s new book, “The Mom Test,” does a nice job highlighting the methodical process which you can use to avoid the typical pitfalls of customer conversations. This could include confirmation bias and looking for compliments rather than actual feedback. You may think your product is the best thing out there, but be prepared to hear otherwise from the people who matter.

Secondly, it’s important to know who your customers are in the first place. In typical B2C companies, that might be more straightforward, but for non-B2C companies, it can take a little bit more work.

Take B2B2C models for example. These cases pose a unique challenge because it can be tempting to stop short of talking to the end customer and primarily focus on the immediate buyer, partner, or distributor. Don’t forget that the “C” stands for consumer, therefore, it is crucial that the customer that derives most value from your proposition in your marketplace.

In the example of a B2B2C business, you will want to have a relationship with the end customer if you want to keep control of your brand and what it stands for. Your marketing message will likely still have to be targeted to them and you will have to invest in those efforts to reach them, even if there is an intermediary step of the ultimate “buyer.”

Customer conversations should involve understanding the dynamics of both the end user and the B2B side of things. With customers, you must communicate with them to position your product vis-a-vis the competitors. You can do this better than your distributors or partners may be able to, even if they are helping you reach them.

Focusing too much on partners may leave you with a product that the end customer doesn’t care about or is wrongly adapted to their needs because you spent too much time caring about distributors.

Another form of customer conversation that needs to be done in tandem is one that is part of a two-sided marketplace. Yes, it will be twice as much work, but it is necessary in order to make sure you aren’t building an “unbalanced” customer acquisition process and product development. Below are some of the articles that thoughtfully discusses the topic.

Keep in mind who you are talking to

The most complex situation is when the customer is not various individuals, but many people disguised as a single figure. This usually happens in situations where the end user is not empowered to actually make the decision to buy. Rather, there is a series of people within an organization that jointly make a purchasing decision.

In slides 49 to 51, Michael J. Skok has a good break down of what he calls the Decision Making Unit (DMU). He discusses the potential constituents of a DMU, and encourages you to think of them as a unit. This means “speaking to your customer” equates to speaking to all of them as they jointly make the decision. Not all organizations have all the components of Skok’s full DMU list, so it’s just about finding the ones that are required to make a decision – and think of those as the DMU.

After hearing many founders share their stories, it is clear that you need to constantly keep in touch with your customers as you continue to evolve your proposition and maintaining focus on what delivers value. The further you are from the reference customer, the more you need to be mindful of not losing touch with your users and their needs, for that can be fatal in an early stage business.

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