Allon Raiz, Raizcorp founder and CEO as well as judge of the Engen Pitch and Polish competition, discusses a range of feedback mechanisms that entrepreneurs can use to refine and improve not only their investor or funding pitches but, in fact, their businesses.
When I am asked whether entrepreneurs are born or made, I respond that the evidence shows that it is neither. Entrepreneurs precipitate. One of the conditions that needs to be present for an entrepreneur to precipitate is their ability to learn and iterate, in other words, they need to be able to apply what they learn in their businesses – particularly in the early stages of business.
If I happen to be standing in front of a room full of entrepreneurs and I’m asked this question, I have a party trick to really underscore my answer. I ask all those entrepreneurs who are currently in a business to put up their hands and usually between 95 to 100% do so. Then I ask how many of them are running the exact same business with the same business model and the same products and services as when they started out. One hundred per cent of the hands go down. Not one hand to be seen.
I go on to explain that the only reason these entrepreneurs’ businesses are still operating today is because they have constantly changed their business models, their pricing, their products or services, etc. The ability to read feedback, learn from it and iterate is the mark of a successful entrepreneur and good business strategy.
So where do we learn from? There are a number of sources of feedback that are immediately available to us as entrepreneurs. Instead of becoming defensive about feedback or criticism, we should relish the opportunity to learn from it and then make the deliberate choice to apply the learning in our businesses.
Let’s look at four types of feedback sources entrepreneurs should embrace and learn from:
1.Investors and financiers . . .
Investors and financiers have a particular lens when looking at your business. They tend to be unemotional and are concerned about three main areas:
- the veracity of your assumptions;
- the known and unknown risks;
- and the ongoing demand for your product or service.
Their questioning will usually therefore focus on these areas and they will highlight any incorrect assumptions that you have made in the design of your business case, new risks that you have never even considered and any potential friction from clients when it comes to purchasing your product or service.
It’s important to take their questions and comments seriously, and then begin to refine your model, your assumptions and even your products based on their feedback.
I strongly advise entrepreneurs who are pitching to an investor or financier to write down the questions that they are asked. Yes, some of the questions may not be valid and others may be the function of a misunderstanding (but this is also a learning on how to pitch better), but the remaining questions will be highly valuable in ensuring that you derive the benefit of their years of experience and exposure to multiple businesses.
2.Market feedback…
The market is the ultimate judge and jury when it comes to product-market fit. If your product (or service) is not priced correctly, if it is not positioned correctly, if it is not distributed through the correct channels or if it does not provide the value the market requires, then the market will reject it.
This list is only a small sampling of the all the judgements the market makes about a product or service. The difficulty for all entrepreneurs – and, in fact, all corporates – who are launching new products is to develop the right profiles for all these various market aspects which, in combination, create the ideal product-market fit.
The process is long and expensive because, as they are trying to ascertain the product-market fit, the entrepreneur is required to shift one or a few of these elements, to try this or that or something else, as they find the sweet spots. There is a bit of science involved, but it is predominantly trial, error and experience. Part of that experience comes from the market telling you what it wants. If you aren’t listening, you are unlikely to pick up the nuances the market may be screaming at you with your zero sales!
To add even further complexity are the responses of your various competitors in the market as you try to gain some of their territory. They may drop their prices, resulting in zero sales to you even though your pricing may be correct. They may provide additional value to their product by offering combination packages which, by comparison, make your product or service seem like less value for money even though it isn’t.
There is also the complexity of sub-markets where a product may have a certain fit profile in one market, but a completely different fit in another market. This means that when you’re testing your product-market fit, you have to do so with a deep understanding of all your market sub-segments and not assume that you are testing for the whole market. For example, in the township market, quart bottles of beer may be highly popular and seen as good value for money, whereas an airline is more likely to purchase only 330ml cans of beer for passenger consumption – an entirely different packaging and volume product.
As with investor feedback, your need to objectively analyse your market feedback and then deliberately – but cautiously – use it to iterate your product or service.
3. Staff feedback…
Staff feedback is an incredibly powerful source of information to guide the iteration of not only your product or service, but also your business model and operating procedures. Your staff are the first to see any inefficiencies – and they are also the first to take any gaps in process that have not been previously identified.
Your sales staff are a major source of feedback from the market through all the questions and objections they receive from clients and potential clients. And if you’re in the service industry, the staff who are providing your service to the client are your greatest source of feedback regarding what is valuable to them and what is not.
All businesses – but particularly startup businesses – need to deliberately solicit feedback from their staff as part of the way they operate. The upside to asking for staff feedback and, more importantly, acting on it, is that your staff feel heard and part of the building process.
However, there are also complexities. Often, feedback is heard through the voice of the most dominant staff member who drowns out all other voices, particularly those with the opposite or dissenting points of view. There is also the complexity of staff providing feedback that serves their own self-interest, such as a salesperson saying a product price is too high. A lower price will make it easier for them to sell and make commission, but it will also mean the business makes less margin and therefore less net profit. Their feedback is therefore good for them but not for the business (unless the lower price results in significantly higher revenues which, in my experience, seldom happens.)
A great forum for staff feedback – which I have found to be highly effective – is the creation of product and process committees. While I don’t like the idea of too many committees, if they are properly designed and managed, they can be a highly beneficial tools of iterative progress in a business. The trick is their composition and management. The committees should be composed of people from across the business who have a range of roles and perspectives.
For example, a product committee could feature:
- A salesperson who is very interested in selling more products and keeping their clients happy.
- Someone involved in delivering the product or service who is more interested in the ease and efficiency of delivery.
- A finance person who is highly sensitive to costs.
- And even someone who has no vested interest, but has the ability to ask the “stupid” questions that often are not asked, but should be.
Another important factor is managing the committee meetings. They need to be regular and rhythmic, for example, weekly or monthly. They also need to be well-facilitated with everyone in the room encouraged to speak their mind. They need to have an agenda and they need to be task output driven. The completion of these tasks must also be managed during the meetings.
If you have designed your business to legitimately receive feedback from staff in a deliberate way, you have effectively set up a mechanism to iterate and evolve.
4. And the best feedback? Existing clients…
While the market can provide you with feedback on its needs and the benefits it seeks from a product or service, this input is quite generic and doesn’t relate directly to your product’s features or functionality. Your clients, on the other hand, can speak to their actual experience with your product and whether it is meeting their specific needs. Moreover, as your relationships with your clients evolve, you can expect the feedback they deliver to become more candid.
In an environment in which technology is constantly changing, demand profiles are changing and even culture is changing, the needs of both the market and your clients are likewise constantly changing. It’s very likely that the products and services you offered five years ago are not appropriate for meeting the needs of today. No business can afford to rest on its laurels – especially when the competition is changing and quite possibly creating different expectations in the market. To survive and thrive, you need to continually iterate your offering.
Your best and cheapest source of genuine market feedback comes from your existing client base. You can regularly touch base with them and ask pointed questions about their changing needs in order to stay relevant. Not only can they provide you with legitimate feedback, but more importantly, it will relate specifically to your product or service. For example, they could tell you they need your product to be able to do a bit more of this or a bit less of that or they need it to integrate into something else, etc. This may not necessarily speak to an immediate change in what the whole market needs but, often, it can alert you to an emerging need that you may want to investigate now or in the future.
There are various ways to solicit client feedback. A common method for startups, particularly in the software industry, is to set up beta user groups. The beta users (clients) get the software product for free or at a substantially discounted price and, in return, are asked to regularly meet with the company’s leadership, salespeople, business analysts and developers to provide feedback on the product’s ease of use, bugs, suggested features and the general intuitive nature of the user interface.
Another method used by smaller businesses who may not have the luxury of giving away or highly discounting their products or services is the concept of forging partnerships as opposed to being regular suppliers. In these cases, the small business will partner with a large business to develop a relatively bespoke solution for them. The downside to this arrangement is that the final product or service may be too tailored and may not have a broader application across the market. The upside is that the development costs are covered by the client who is prepared to pay to have their specific needs met.
Whatever the approach you choose – traditional client feedback, beta groups or partnerships – existing clients remain your most valuable source of product-market fit information. To trot out an old idiom, you are hearing it straight from the horse’s mouth. By definition, there can be no better form of feedback.
