Can churn be good?

Churn is inherently a bad thing for any startup. You don’t want to lose customers or revenue. At least not in the 99% of the cases.

But churn can also be spun into a good thing.

Churn is an opportunity for you to learn, what you can improve and do better. Because by churning, customers are essentially telling you that you’re not bringing enough value to them.

Hence churn is an opportunity for you to think about how you can deliver more value going forward. And start doing so. But you of course first need to understand why they churn – really understand it:

If they have chosen a competitor, figure out why? Is it a matter of features? Flow? Price? Or something completely different?

Should the churn make you reconsider your roadmap priorities? Or how you market and sell your product so expectations are better aligned, and you get better at understanding who the right and best customers are for you?

Etc.

There are plenty of opportunities to learn from churn, and you should. Unless churn happens because a customer goes bankrupt, each churning customer is an opportunity to understand the market, the customers and your value proposition to them better.

So take the time. Don’t neglect churn or accept it by relentlessly focusing on growth in new customers to compensate for the customers, who leave. First of all, it will be an issue when growth becomes harder to sustain. And second, and most importantly, you miss out on an opportunity to do better going forward. And reduce future churn.

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How to win with corporates

I have always held a strong belief in the outsize value of strategic partnerships. And I must confess it has been a frustrating pain to be part of and watch a lot of good intentions end in absolutely nothing.

I am by no means alone with that experience. In fact I think it’s fair to say that it’s more the rule than the exception that these partnerships between corporates and startups don’t work. The excitement at signing is almost inversely related to the feeling of frustration and banging your head against the wall, once the partnership has to be implemented to start delivering on all the promises.

But it can be done. One startup, I have worked with over the last few months, has managed to get to a winning formula, and I thought I wanted to take this opportunity to share some of my learnings from it in the hope that you might use them to improve your own prospects with getting a great return on your strategic partnerships.

The first thing to consider is whether or not what you’re doing solves a real pain that the corporate has. Yes, we all know that big corporations can struggle with innovation, but that’s not where the real potential lies. Due to the law of big numbers, it makes much more of a dent in the corporate structure, if you can help them sell more or what they are already selling.

In essence that means that if you have something that makes the corporates product better in itself or provides leads for more sales of their existing product by giving their sales people cloud cover to reengage with their customers with something new and exciting, you could have something that is very valuable to a strategic partnership. But you need to have it mapped out beforehand in order to put yourself in the strongest possible position for identifying the right partner and do the hard negotiations.

If you succeed in coming up with a partnership, the hard work truly starts. A lot of startups mistakenly think that it’s all about teaching the corporate to adapt to their more lean and efficient way of doing things, but I honestly don’t think that’s the case. What I see working is in fact more the opposite; that the more you can factor in how they work in your own process and be open, transparent and accountable about it, the easier it will be for the corporate to integrate you and your product in their offering – which is essentially the only recipe for commercial success with a corporate.

Finally, you need to ensure that incentives are aligned. No matter what the corporate might tell you, its a matter of fact that they are ruled by objectives. That also means that key stakeholders bonus plans are tied to objectives, and they will do whatever they can to succeed with those in order to get bonuses and promotions. Nothing else will really be touched. So be damn sure you understand their objectives, their KPIs and bonus targets, and do whatever you can to slot into that in the simplest possible way. Make it super easy for them to engage – the less they have to think about it the better – and you’ll be in a good position to achieve success.

Does all of the above mean that you always need to dance to the corporates tune? Well, if you want to succeed with a strategic partnership centered around marketing and sales with a big corporate, I think the answer is yes. The balance of power isn’t in your favor, and the only thing you get from insisting you’re equals is…nothing. Then it’s much better to just eat humble pie, focus on the end goal of making things work and making a solid profit. And then stick to the formula.

That should enable you to consider frustrations over failed strategic partnerships a thing of the past.

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Tracking progress

As a former business manager at Microsoft, I am almost bred up on KPI’s, metrics, tracking progress and so forth. Sometimes even to the extend where I have a hard time understanding, why it is a more alien concept to many. Including some startups.

The way I usually frame it is that you cannot play football, if you don’t have goal posts that help you decide, when you have scored the winning goal. Or any goal for that matter. If you don’t have goals, you’re just kicking around, and while that can be nice exercise too, it’s kind of hard to measure who’s winning and who’s losing.

So, if we accept that being able to set goals and track progress can be helpful, how do you go about it in a way that doesn’t kill you in bureaucracy.

This is where I actually back in the day got a great tip from my colleague at Berlingske Media, CFO Peter Nordgaard. He had a very simple way of looking at things and how to determine real performance that goes something like this:

You basically have 3 things you’re looking at in a traffic light perspective to set goals and track progress:

First you look a the market and the macro economic climate. What’s your assumptions related to overall growth in the economy YoY. Make that your target.

Then you look at the competition in the market. What’s your target market looking like? How much is it growing? Make that your first target? How much share are your most important competitors looking to grow? Make that your second target (and in effect your pre-dominant benchmark).

Finally, look at yourself. Given your assumptions about the economy, the market and the competition, how do you think you yourself is going to do? How much is you going to grow? What does that mean in terms of products shipped, sold, used or whatever your Northstar metric is?

Does your Northstar metric make sense in the light of all of the above (aka is it still valid as the most important single denominator in determining your progress)? If yes, good. Keep it. If no, come up with one that is.

Now you essentially have a Northstar metric and three sets of simple KPI’s you can track in order to determine your progress. And this is where it gets interesting:

If you end up short but the economy and the market has exceeded expectations, you will know that the buck stops with you. On the other hand: If you have done better than expected for the economy and the market, you have really put in a stellar performance.

While that in itself is super simple, it does another thing that is really great: It eliminates any doubt as to what should be the focus of your review and discussion about what to do going forward.

Because if it is your own performance that is sub-par, it will be evident, and you don’t have the need to come up with silly excuses. You can address the real problem. And move on from it.

So think about this super efficient approach the next time, you’re discussing KPI’s and ways to track your progress. We’re not too far off the start of a new year, so this might actually be as good a time as any.

(Photo by Tolga Ulkan on Unsplash)

Bad market feedback

One of the hardest things for many startups is dealing with bad market feedback; the sense that what you have been trying to bring to the world just isn’t being that well received at all.

It is the flipside of doing market testing and validation. While obviously the right thing to do, we always go into a test in the hope that results will be good and support our hypothesis. Yet, many times it just won’t happen.

What to do then?

Obviously the answer is not not to do any testing. That’s just stupid; it won’t make the bad feedback go away – it will just present itself way later when you have put a lot more energy and ressources into a product that ultimately might be failing.

The answer of course is to (1) learn to deal with bad market feedback and (2) think about how you deal with particular feedback based on what it is that you’re testing.

The best way to deal with bad market feedback is to remember that the market and the customers are always right. If you get bad feedback it is a sign that something in what you’re doing is off; the wrong approach, the wrong customer segment, maybe even the wrong product.

You get the feedback, internalize it, redo and come back much stronger. And you understand and accept that there are no points for insisting you’re right and the market is wrong. None.

On the second point, you can grade how you do testing and work with bad market feedback. While it of course sucks to get very bad feedback for your product as such, getting bad market feedback for an outlier idea or approach is actually really, really valuable.

Let’s assume that you have been playing with an idea of getting a sub-set of your feature set earlier to market in order to start generating revenue. It’s not entirely ‘on strategy’ when you look at your vision, but you want to start generating revenue as soon as possible.

Should you do that? Or should you stay the original course?

Test it.

If you get bad market feedback from testing that outlier approach, you will have learned that (a) clearly your idea is not going to be a runaway hit and (b) maybe the opportunity you saw to get an early product out and essentially diversify is a bad one and will only take away focus and ressources from your main effort. If that is the case, you will be happy that the bad market feedback has helped you and your team dodge a future bullet.

So, in summary, bad market feedback can be extremely good and valuable feedback, as it can help you focus on what’s really important and utilize your ressources in the best possible way. So make sure you don’t get distracted on a personal level and take it in as a defeat that leaves you stuck in f***.

It’s not.

(Photo by Jon Tyson on Unsplash)

See you at TechBBQ

This Thursday and Friday I am going to the TechBBQ tech conference in Copenhagen.

Am I looking forward to it? You bet, I am. I can’t remember when the last time was I had the opportunity to go to a conference, meet new people and learn interesting things. But it feels like it has been ages.

I think a lot of us are really looking forward to going out among others again in a professional setting after the long Covid-19 isolation. And maybe – just maybe – the lockdown has been a blessing in disguise in the sense that we’re now not taking opportunities to meet in person for granted but are instead looking to get the absolute most out of them.

I certainly intend to. I have a bunch of 1:1 meetings lined up with interesting people, but if you see me there, please feel free to come and say ‘Hi!’.

If you’re unsure of whether it’s me, I will be wearing ‘People’ clothing, so I should be recognizable.

I hope to see you there!

(Photo by Adam Jang on Unsplash)

Mindset or skills?

What is most important? Having the right skills or the right mindset?

With all the talk about the need for further specialization to drive competitive advantage, you would think that skills are super important. But in reality it is the other way around:

Mindset wins. Every single time.

Now, why is that?

It is pretty simple really:

A persons mindset says a lot about character, values, tenacity, ambition – and pretty much everything else.

It speaks to the core of the person and how that person operates, and it is precisely those things that will help carry you and your team through thick and thin, when you have onboarded that person.

As for skills, they are important too for sure. But they are much more fleeting, and they can be learned, when you need them.

Mindset cannot.

Thus it is super important that when you recruit, you’re recruiting mostly for mindset and less so for skills. Of course it is a balance, but I am sure you get the point.

After all you would rather want a decent contributor with a great mindset than what looks like a superstar but who is in reality rotten to the core.

The first one will grow into doing great things with you and your company. The second one will poison everything around him.

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Profitable disagreement

I have always found that one of the greatest opportunities to learn something new and valuable is through constructive disagreement.

I find that when there’s disagreement in the air, there is a chance to broaden your own horizon. If you have the ability to breathe deeply, listen in and resist the urge to just shoot back with your own opinions.

I can’t remember a time where I didn’t learn something or at least have a proper reflection, and on the opposite scale I have even had a couple of epiphany moments that made a huge difference to me in my decision making.

Yet, despite of this, I often hear how disagreement lead to people separating and to great team members leaving teams who IMHO really, really need the kind of disagreement, pushback and questions being asked that they are waving goodbye to.

Instead of working out the severance papers these teams and the people involved should be focusing on what they could each learn from each other, and how this new and broader perspective could be brought to bear on the profitable development of the company.

Because there often is a direct correlation between differences of opinion, a respectful learning environment and broadening of ones horizon and the bottom line.

Yes, disagreement can be painful. And of course also sometimes beyond repair. But it also has an immense potential for future profit that’s worth investing some serious peace keeping efforts in.

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The ‘know all’ fallacy

Some of the most charismatic and persuasive people I have ever met have also been the ones who have been the most convinced that they had it all figured out and knew everything.

Until they didn’t.

I am not suggesting that they all failed. But a good number of them did. Because they thought they ‘knew’, ventured ahead without taking stock of what was going on around them – and ultimately hit a concrete wall.

Besides the pain of that particular experience, the most painful thing was that it could most likely have been avoided by adopting a very different approach.

A learning approach, if you will.

When you adapt a learning approach you are more humble.

You’re able to take more signals in.

You are more aware that you’re not directing the world, the world is directing your opportunities, and you adapt.

Adaption is key here. The world changes and you need to do that too in order to be forward looking.

‘Knowing it all’ is inherently backward looking. And not very useful when things fundamentally change.

When you learn and adapt, you are able to seize new opportunities and with that the odds of success increases.

Which again makes it pretty stupid to insist on being the one ‘knowing it all’, don’t you think?

(Photo by Joao Tzanno on Unsplash)