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Startup blinders? When customers like your product for the “wrong” reason

Many of us have experience with early stage companies, and the stripes on our back to prove it - the intense focus on execution and revenue resulting in accelerated processes and lack of time to think strategically.

But some are also rooted in the backgrounds and perspectives of founders and their product and engineering teams. If and when customers and the market contradict a team’s deep-seated biases and assumptions, products, and potentially companies, are at serious risk.

Addressing this risk is one of the greatest challenges for early stage companies. To do so requires the ability to listen to what customers and the market are telling you regarding your product, positioning or messaging, and then make hard decisions that go against the grain of your founder experience, technology, or market understanding.

Case in point. One of my early (successful) startup experiences was with a company that leveraged cutting edge classification technology to build a solution that would transform legal document review. The volume of electronic documents was growing almost exponentially, with no end in sight. Review was inefficient, time consuming and costly. And it was almost a hit-or-miss proposition to locate and identify critical documents.

ML-based classification, even before advanced text analytics or even more powerful generative-AI LLMs, offered an ability to group similar documents together and identify important clusters for review, thus accelerating the review, increasing accuracy, and identifying critical documents faster. What was not to like? What customer would not want these great benefits?

We expended a lot of time and effort evangelizing these capabilities and benefits. The company was growing quickly. And despite some problematic feedback, members of both business and technical leadership continued to congratulate themselves on the value the classification technology was providing to our customers, and how it was differentiating us from competitors and disrupting the market.

But then…

A senior leader from one of our most important partners praised our software for its efficiency and effectiveness on a major conference panel - but not because of the classification capabilities. Rather, for him the killer feature was the easy-to-use UX! Classification was a nice-to-have.

This was the moment of truth. And we failed. We insisted on the value of the technology and its differentiation, rather than listen to the customer – because it contravened some of our deeply held core beliefs about our product and GTM.

This did not prevent us from a successful exit. However, it is crystal clear that if we had made different decisions based on a deeper understanding of customer needs, their experience and feedback, that our growth would have been stronger, and our eventual exit would have been achieved at a higher valuation.

A few lessons:

Listen actively. Especially at early stages interacting with customers cannot be an exercise in passive response tabulation. It requires deep, sensitive listening, and empathetic but active probing, to truly understand their feelings and responses that are not in line with what you expect and want to hear from them.

Identify and challenge assumptions. The more you can identify a team’s deep-seated biases and assumptions, the better you will be able to deal with them objectively against new data, so that they do not skew decision-making. When the team’s strong personal feelings, experiences and relationships come into play, this can be very difficult to achieve. You must be fearless and ground your position in data when arguing against prevailing, deeply invested assumptions and biases.

Adapt using data. Data that you uncover can range from easy-to-achieve UX or workflow changes to deeper structural change either in the application or technology. And sometimes it will point towards the need to fundamentally rethink, even pivot, the use case and functionality for which the technology has been deployed.

Strategically integrate. Build this into your PM and PMM worldviews, processes and objectives. Partnering with teams that touch customers daily, such as Customer Success and Sales, is paramount. And then emplacing the impacted use cases, and the changes that they demand, within the larger product roadmap and GTM strategy, will help ensure positive impact.

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