Founders and CEOs: You Can’t Outsource Learning

In a startup instead of paying consultants to tell you what they learned you want to pay them to teach you how to learn.

Roominate, one of my favorite Lean LaunchPad teams came out to the ranch last week for a strategy session. Alice and Bettina had taken an idea they had tested in the class – building toys for young girls to have fun with Science, Technology, Engineering, and Math, and started a company. The Roominate dollhouse building kits are being sold via their own website and soon, retail channels. They’ve shipped over 5,000 to enthusiastic parents and their daughters.

As soon as they had designed the product, they found a contract manufacturer to build the product in China. Alice and Bettina are hands-on mechanical and electrical engineers, so instead of assuming everything would go smoothly, they wisely got on a plane to Dongguan China and worked with the factory directly. They learned a ton.

But we were meeting to talk about sales and marketing. They outlined their retail channel and PR strategy and told me about the type of consultants they wanted to hire.

Hiring Channel Sales

“So what would the retail channel consultant do?” I asked. Alice looked at me like I was a bit slow, but went on to describe how this consultant was going to take their product around to buyers inside major retail chains like Target, Toys R Us, Walmart, and others to see if they could get them to buy their product. “That sounds great.” I said, “When are you leaving for the trip?” They looked confused. “We’re not going on any of these calls. Our consultant is going and then he’s going to give us a report of how willing these stores are to carry our product.” Oh…

I said, “Let me see if I understand this correctly. What if a buyer asks, can you make a custom version of your product? Can your consultant answer that question on the spot? What if a buyer said no? Will your consultant know what questions to ask right then to figure out how to get them to yes?” I let this sink in and then offered, “Think about it for a minute. You’re going to pay someone else to learn and discover if your product fits this channel, and you’re are not going to do any of the learning yourself? You didn’t skip the trip learning how to manufacture the product. You got on a plane yourself and went to China. Why doesn’t this sound like the right thing to do for channel sales?” They thought about it for a moment and said, “Well we feel like we understand how to build things, but sales is something we thought we’d hire an expert to do.”

Hiring PR Agencies

We had an almost identical conversation when the subject turned to hiring a Public Relations agency. Bettina said, “We want to drive customer demand into our channel.” That’s smart I thought, a real clear charter for PR. “What are they going to do for you?” I asked. “Well all the agencies we interview tell us they can survey our customers and come up with our positioning and then help us target the right blogs, influencers and press.

This felt like déjà vu all over again.

I took a deep breath and said, “Look this is just like the channel consultant conversation. But in this case it’s even clearer. Didn’t you get started by testing out every iteration with girls and watching firsthand what gets them excited? Don’t you have 5,000 existing customers? And haven’t you been telling me you’ve been talking to them continuously?” They nodded in agreement. I suggested, “Why don’t you guys take a first pass and draft a positioning brief with target messages, think through who you think the audiences are, and you take a first pass at who you think the press should be. The team looked at me incredulously. “You want us to do this? We don’t know the first thing about press, that’s why we want to hire the experts.” It was the answer I expected.

“Let me be clear,” I explained. “At this moment you know more about your customers than any PR agency will. You’ve spent the last six months testing positioning, messages, and talking to the press yourself. What I want you to do is spend an hour in a conference room and write up all you learned. What worked, what didn’t, etc. Then summarize it in a brief – a one, max two-page document that you hand to prospective PR agencies. And when you hand it to them say, “We know you can do better, but here’s what we’ve learned so far.”” They thought about it for a while and said, “We want to hire a PR agency so we don’t have to do this stuff. We’re too busy focusing on getting the product right.”

I pushed back, reminding them, “Look, half the agencies that see your brief are going to decline to work with you. They make most of their money doing the front-end work you already did. You do need to hire a PR agency, but I’m suggesting that you start by raising the bar on where they need to start.”

You Need to Do the Learning

Thinking that founders hire domain experts to get them into places and do things they don’t have any clue about is a mistake most founding CEOs make. It’s wrong. If you plan to be the CEO who runs the company, you need these resources teaching you how to do it, not reporting their results to you. For Roominate I suggested that Alice and Bettina needed to try to find a channel consultant who would take them along on the sales calls and have the founders meet buyers directly. Why? Not to turn them into channel sales people but to hear customer objections unfiltered. To get data that they—and only they, not a consultant—could turn into insight about iterations and pivots about their business model. And to see how the process works directly.

A year from now when they will be hiring their first VP of Channel Sales, they want the interview to go something like, “Well we sold the first three channel partners ourselves—what can you do for us?”

The same is true for hiring the PR agency. The conversation should be, “Here’s what we learned, but we know this is your expertise. Tell us what we’re missing and how your firm can do better than our first pass.”

As a founder—when you’re searching for a business model—make sure that you’re the ones doing the learning, not the outsourced help.

There’s Not Enough Time

The biggest objections I get when I offer this advice is, “There’s not enough time in the day,” or “I need to be building the product,” or the more modern version is, “I’m focused on product/market fit right now.”

The reality is that they’re all excuses. Of course product and product/market fit are the first critical steps in a startup – but outsourcing your learning about the other parts of the business model are the reasons why your investors will be hiring an operating executive as your replacement—once you done all the hard work.

Lessons Learned

  • You need to do the learning not your consultants
  • Most consultants will think that’s their secret sauce and not want your business
  • The smart ones will realize that’s how they’ll build a long-term relationship with you
  • Hire them
  • Not understanding the other parts of your business model is a reason investors hire an operating executive

This post appeared originally on Steve Blank’s blog and is republished by permission.

Author: Steve Blank

A prolific educator, thought leader and writer on Customer Development for Startups, Steve Blank is a retired serial entrepreneur who teaches, refines, writes and blogs on “Customer Development,” a rigorous methodology he developed to bring the “scientific method” to the typically chaotic, seemingly disorganized startup process. Now teaching entrepreneurship at three major universities, Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in “undisclosed locations.” Four Steps to the Epiphany, Blank’s fast-selling book, details the Customer Development process and is increasingly a “must read” among entrepreneurs, investors, and established companies alike, when the focus is optimizing a startup’s chances for scalability and success. After 21 years driving 8 high technology startups, today Steve teaches entrepreneurship to both undergraduate and graduate students at U.C. Berkeley’s Haas School of Business, Stanford University’s School of Engineering and the Columbia/Berkeley Joint Executive MBA program. His “Customer Development” teaching and writing coalesce and codify his experiences and observations of entrepreneurs in action, including his own and those he advises. “Once removed from the day-to-day intensity of founding a startup, I was able to observe a pattern that distinguishes successful startups from failures,” Blank says. In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering. The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley. In 2010, he was earned the Earl F. Cheit Outstanding Teaching Award at U.C. Berkeley Haas School of Business. Despite these accolades, Steve says he might well have been voted “least likely to succeed” in his New York City high school class. Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games. Steve co-founded startup number eight, E.piphany, in his living room in 1996. In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning leading to The Four Steps. An avid reader in history, technology, and entrepreneurship who seldom cracks a novel, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn elsewhere. It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.” Steve’s interest in combining conservation with best business practices had Governor Arnold Schwarzenegger appoint him a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast. He also serves on the Expert Advisory Panel for the California Ocean Protection Council. Steve serves on the board of Audubon California, was its past chair, and spent several years on the Audubon National Board. A board member of Peninsula Open Space Land Trust (POST), Blank recently became a trustee of U.C. Santa Cruz and a Director of the California League of Conservation Voters (CLCV). Steve’s proudest startups are daughters Katie and Sara, co-developed with wife Alison Elliott. The Blanks live in Silicon Valley.