23. 8. 2023
6 min read
How the Customer Centric Approach and Team Set the Course for Startup Success
Many startups fail, and there are numerous reasons for that. Despite this, the allure of entrepreneurship persists, largely driven by the inspiring success stories we often see in the media. What makes a startup successful? Drawing from my extensive experience, this article cuts to the core. It reveals two key factors you simply can't ignore: customer centricity and building the right team.
1. Extreme focus on the customer
At Sudolabs, our primary focus is on seed or series A startups, which are still in the process of finding their product-market fit. And I am going to write mostly about them in this article.
As startups progress and reach the series B+ stage, they have usually achieved product-market fit already. This phase involves shifting the focus towards scalability, product robustness, and making smaller, less visible changes to the product. A/B testing and quantitative methods play a more prominent role in this stage.
On the other hand, for early-stage startups, we rely heavily on qualitative methods. You need to have real authentic conversations with users to understand their problems. In this early stage, product changes are often drastic, involving significant pivots and it is very common for startups to pivot at least once or twice during their journey. The likelihood of the initial idea you embark on building with resulting in success is rather small.
The likelihood of the initial idea you embark on building with resulting in success is rather small.
At early-stage startups, scalability and robustness are not the primary concerns. Quite the opposite. Instead, the entire team must adopt a mindset that avoids over-engineering and embrace the need to pivot, test, and iterate on the product.
But don’t get me wrong. While simplicity is crucial, it is equally vital that products are not ugly or buggy, as this may annoy first users. They just need to be simple. Do not overload the first MVP with features that make them complex. The art in this phase is to iterate on a small set of functionalities, observe what works, and collaborate closely with end-users.
The typical development process is usually linear and looks like this - it starts with the founder specifying the idea and finding a team to develop it. Then, they launch the Minimum Viable Product (MVP) in the market.
However, the journey doesn't end there. At this point, the focus shifts to acquiring the first users for the product. This is where sales, marketing, and other user acquisition activities come into play. It's a challenging phase, and unfortunately, many products fail at this juncture.
Mark Andersen, the founder of a venture capital fund, astutely pointed out that "All of our time is already allocated.” we are constantly bombarded with advertisements, products, and tools. So, why should the users choose a new, unknown product?
That's precisely why we recommend flipping the process and starting with users. When you identify a potential opportunity in the market, delay development and direct your attention to the customers. Find out if anyone in the market is interested in your idea.
Spend time, in the beginning, conducting interviews with potential future users (but please not casual discussions over a beer). In the early stages, structured interviews with a well-defined target audience are essential.
Another example comes from Xero, the largest known accounting software, a startup originating from New Zealand. They hired dozens of freelance accountants at the beginning and observed them hands-on to understand their problems. Only then did they move on to the development and the product specification phase.
Never embark on development without first creating a prototype and asking for feedback from a few potential users.
These days, there are many tools that make it easy to create simplified prototypes without a programming background. These tools are called design tools or low-code tooling, read more about them here.
Product management is about prioritizing users first, and the magic will follow.
2. The Team
How the team is built and how the founder approaches whom to hire and invite to the team are critical factors. There is a minimum foundation that every startup should have. If it is a technological product, then definitely you will need engineering, product design, and a product manager.
The Product Manager is responsible for the first important point we discussed above - extreme focus on users. They ensure that you don't become a feature factory, just churning out features without any purpose or understanding of user needs.
It is often overlooked, but this is exactly what we strive to emphasize at Sudolabs when working with clients. Whenever a client comes to us and wants only development or programmers, we try to explain to them that the success of their product isn't just about the programming, especially in this early stage.
In our collaboration with clients, we take care of the product and technical aspects, allowing the founder to focus on critical areas such as sales, marketing, operations, and fundraising, with sales being of paramount importance. Many early-stage founders are surprised by how much time they have to dedicate to sales. The alpha and omega of success is that the founder spends hours communicating with potential clients. The new product will not sell itself.
Early-stage sales are particularly demanding due to the majority of the population not being early adopters. Most of us are motivated in our jobs to find a thing/product/process/system and optimize it over time. However, during the early stages of a startup, the primary challenge is to identify and connect with that crucial 10% of early adopters willing to embrace something new.
Another crucial aspect of the team, and here I'd like to emphasize the significant advantage of collaborating with an external development and product partner like us, is FLEXIBILITY. Building a 10-member team for example with all 10 individuals on the payroll from the beginning can be costly since each product stage demands a slightly different skill set.
During the initial discovery phase, when we conduct research and engage with users, only the founder's involvement is necessary. As the process progresses, the product manager and product designer join the team, defining the product's direction based on user feedback and insights.
Subsequently, the MVP delivery phase starts, and in this stage, we need an engineering team for development. However, the MVP should be short and quick, lasting a maximum of 2 months, which is then released to the market. We need to find out the results and test the MVP, and get feedback. This may mean stopping development for 2-3 months. And this may mean having a few costly developers on the bench in case you have an in-house team.
By gradually assimilating feedback from our initial users, we can gradually resume development and fine-tune the product to resonate optimally with the target audience.
A significant advantage in accomplishing this without incurring significant costs on the startup's payroll is collaborating with an external partner like us, offering the necessary flexibility and saving you valuable resources.
Besides that, we and other engineering and product partners provide the most significant value by covering the entire product, technology, and design part. You - the founder - then have enough time and space to focus on fundraising and the business side of the startup.
A farewell recommendation for you...
You can best acquire knowledge about building early-stage digital products from Y Combinator Startup School, which has a vast amount of freely available materials and documents.