When people step away from a career to start a new venture, perhaps the biggest shock is learning how hard it is to get things done. You no longer have the power to compel others to join your meeting, buy your products or answer your emails. Humbled and alone, you soon understand that relying on the kindness of others is the only way to survive. Veteran entrepreneurs understand one must tap into a complex social system of trading favors.

Trading favors is one of the most important survival strategies in human history. Favors were a form of currency long before the first coin was ever minted. If your ancestor was lucky on a hunt for meat, he shared with his fellow tribesmen, knowing they would remember his gift when they were lucky next time. Some scientists believe our brains grew larger in order to  to keep track of frequent, complex trading exchanges among people.

Even while they are inventing the most breakthrough technologies, entrepreneurs must go back to these social rules to give their companies a shot at a future. Other people hold the key to information or access that could mean life or death for a new venture. With little money in the bank and the clock ticking mercilessly, the favor of an introduction to a potential investor, customer, advisor or new hire can mean everything.

Unfortunately no one teaches these soft skills in business school, and few people openly talk about their strategies for getting the returned phone call or opened door. I have learned a few lessons along nearly a decade of small business trials and tribulations, and I offer these Five Rules for the Favor Economy:

First, you must give favors to eventually receive them in return. Do not even think about starting a business unless you have spent years assisting others. By building relationships and giving proactively, you will not only be in position to ask for help later, but you will learn much through the process.

Second, there is no better time to ask for a favor than when someone has asked one of you. Be sure that the other party knows what is on your “need list” when they come calling. For example, I provided helpful advice for a friend, and at the end of the conversation I asked if he knew any good leads in my industry. A few days later he happily made a very valuable introduction. An exchange of time, advice and contacts allows both sides to win right away.

Third, make it as easy as possible for people to lift that finger of help. For example, give them a sentence or two about your company that they can copy and paste into an email. This not only takes a little pain out of the process, but it shows your friend that you are all over the details.

Fourth, realize that favor trading can run years between exchanges, so be sure to keep old bonds strong with small touches over time. We all hate it when the person we have not spoken to in ten years suddenly sends an email or LinkedIn request with a desire for help.. I like to try to grab coffee with out-of-town contacts when I travel. One friend randomly calls contacts on his commute home each day to keep in touch.

Finally, I am not a big believer in returning favors with gifts. Recently a recruiter that I assisted went out of her way to find a wine store that could send me a gift certificate as a thank you. Fine wine is always nice to sip, but I would much rather have her volunteer to connect me with one of her many Chief Marketing Officer clients. Wine is consumed and forgotten; each favor as priceless and truly improves with time.

Despite thousands of years of human history, trading favors and carefully managing your contact list does not come easy to everyone. However no one can build a business without the non-financial help of others. As long as you remember to give, as much or more than you receive, chances are that enough doors will open for you to get a fair shot at success.

This August’s Wired cover story asks “Do You Really Want To Be Like Steve Jobs?” Now that nearly a year has passed since the legendary innovator left us, it seems many leaders are beginning to doubt the Jobs path to success. One of the most frequent Jobs lessons I hear is “He didn’t believe in market research.” This broad claim distorts the reality of Apple’s success and weakens entrepreneurs’ chances. The purpose of this post is to bring some clarity to Jobs’ words and show how market research should and shouldn’t be used.

I was compelled to write this post after seeing a stream of comments erupt at a LinkedIn group on New Product Development. A post titled “Three Reasons Why Steve Jobs Didn’t Need Market Research” solicited passionate responses from this group of innovators who come from both the startup and corporate worlds. Clearly those of us who work to launch new products and assist others in the process are struggling with “the Steve Jobs market research quote.”

Every few weeks I come across an objection to market research when I speak with startup founders about my Minimum Viable Concept Test. Some first-time founders feel that research flies in the face of what they hear from startup luminaries. Market research is sometimes derided in Silicon Valley circles as a sign of weakness. Founders are encouraged to be determined, passionate go-getters who “keep shipping code.” They feel pressure to be constant cheerleaders with investors, partners, friends and family. All news most be good news and momentum may never ebb. Market research can feel like a brake on progress, and, deeper-down, some founders fear that “bad results” from testing with customers will threaten their progress and promises.

I fear that the rising generation of innovators is following “rules” laid down by investors who have never actually built a business–or they have only seen market research used in big corporations, where studies cost many thousands of dollars and output is just as likely to be a bureaucratic barrier to progress. As someone who has used market research to build successful business at both big companies and startups, I’d like to offer entrepreneurs a nuanced guide…

What Jobs Really Thought About Research

Before moving on, we should analyze Jobs’ actual words about market research. Here are the three relevant quotes that I found in Walter Issacson’s official Jobs biography:

• At a 1982 planning retreat, someone on the Mac team, “thought they should do some market research to see what customers wanted. ‘No,’ [Jobs] replied, ‘because customers don’t know what they want until we’ve shown them.’”
• “On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, ‘Did Alexander Graham Bell do any market research before he invented the phone?’”
• Jobs: “Some people say, ‘Give customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, “A faster horse!”‘ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

I wholeheartedly agree in these quotes. One should never conduct a research study that asks people what they want–yet it is a mistake that big and small companies make every day. I learned about the right way to research within the first few months of my time working in the new products team at Procter & Gamble, a company legendary for creating billion-dollar categories ranging from disposable diapers to Swiffer and Febreze. Broadly speaking, there are two types of research that work–and they are completely consistent with Jobs’ words and success.

Market Research that Jobs Agreed With

First, you must spend time understanding and gaining insights into consumers’ existing habits, beliefs, routines and unmet needs. We would never ask people, “What should we develop to make your life easier?” Instead, we spent time with people in their homes and watched them at the store, then we dug through data about what they are buying and using. Your job at the early stage of innovation is to get into the shoes of your customer, understand her life, and look for insights that give you ideas on products that you could create that would surprise and delight her.

And this is exactly what Jobs was so good at. He saw early on that people were interested in using computers, but were frustrated at their complexity. He saw that people loved music, but couldn’t stand loading a few dozen songs at a time onto the early MP3 players. Jobs deeply understood how people engaged with technology. And while he often used himself as the “focus group of one,” he kept the desires of billions of people in mind, rather than just following the whims of a single billionaire. Compare that to Bill Gates, who infamously pushed forward an Internet-enabled watch because he wanted one and thought everyone else would, too.

The second role of market research comes in evaluating the ideas that come out of customer understanding and insights. At Procter & Gamble, we wrote up descriptions of our ideas and shared them with people in one-one-one conversations and in national quantitative surveys in order to gauge their interest and willingness to buy. This is basis of the Minimum Viable Concept Test for startups. In big and small companies alike, it is invaluable to get direct customer feedback. While it’s tough to get customers to tell you what they want, they do a great job of reacting to ideas that you show them. After all, reacting to new ideas is something they do every day when they turn on the TV, chat with friends or enter a store. Customer feedback on ideas helps you refine your product, model the business potential, and sometimes prevent you from a costly failure.

Again, this is exactly what Steve Jobs agreed with and is what the Apple team does every day. As stated in the Jobs quotes above, you’ve got to “show them” what you have come up with and use their reactions to guide you. Apple has a massive team of user experience people who use customer input and testing to improve their products.

When Jobs pointedly rejected “market research” I believe he was really making a point that the way most big consumer electronics companies used research was dead wrong. And I fully agree that most of the dozens of Fortune 100 companies I have worked with are more likely to mis-use the research that they conduct. Based on my experience, here are four big lessons in the right way to conduct market research:

Focus on People, Not Numbers

Nearly every kind of consumer research generates numbers–things like the percentage of likes/dislikes, or how many people say they would download an app or buy a product. I share a lot of numbers in my Minimum Viable Concept Tests, and the companies I work with are often staffed by numbers-oriented people. Sometimes they look solely at the number output and yearn for a score that predicts their odds of success. This is tempting but it is the wrong way to think.

Instead, research number results should help uncover insights and suggest ways of improving an idea. I actually first look at customers’ written comments before analyzing the quantitative responses in research. I find that the words people use when we ask questions such as “What do you like or dislike?” are infinitely more valuable than number scores and graphs. In these words we can get a true sense for what they think and feel–and remember, getting inside customers’ hearts and minds is what really led to Jobs’ success. If anything, the numbers should show you where you need to spend more time understanding customers and adjusting your product to fit them.

Never Conduct Research to “Validate”

I cannot help visibly cringing whenever a client of mine says they want to conduct market research to “validate our idea.” What people usually mean when they use the “v-word” is: “We know we have a winner, but someone (investor, boss, partner) wants to see some third-party proof.” I’ve even seen people try to purposely engineer research so that the test results come back positive–and believe me, you can always set up research to tell a story that you want told (just ask any political operative).

Research should only be done to test your hypotheses and improve your product. Otherwise you are setting yourself up for disappointment and failure. Winning innovators are confident in their ideas and abilities, yet are open to new data and eager for the voice of the customer to help guide their development.

Research Must Drive Action, Not Delay Decisions

Anyone who works in innovation at a big company has come to dread the phrase, “Let’s get some more research…” It has become the classic tactic to delay progress and postpone hard decisions until a later date. Instead, research should be a driver of decisions and progress. If an investor or superior ever forces you to conduct research before moving forward, you should get sign-off on what steps will come out of the research. In other words: “If the research shows that X hypothesis is correct, you (manager/investor) agree to move forward with (launch/investment).” This forces the big decisions you need and prevents research from being the scapegoat.

Startups often suffer from a different type of delay; they tend to believe that the only useful way to learn is to “just launch it.” As I wrote in detail in this post, too many startups buy into a warped interpretation of The Lean Startup Method and don’t get real customer feedback until they launch and get TechCrunch coverage. Unfortunately, by waiting for launch they delay learning, and often they find it harder to shift course. Earlier customer feedback, say through deep one-on-one conversations or an MVC Test, can significantly improve the product before it hits the market.

Conclusion

Wired’s article on Steve Jobs ends with a compelling summary by Robert Sutton, a professor of management and engineering at Stanford who wrote the 2007 best-seller The No Asshole Rule. According to Sutton:

Jobs has become a Rorschach test, a screen onto which entrepreneurs and executives can project a justification of their own lives: choices they would have made anyway, difficult traits they already possess. Everyone has their own private Steve Jobs. It usually tells you a lot about them–and a little about Jobs.”

In other words, if you don’t believe in market research it’s probably an internalized bias and you are just using Steve Jobs success to justify this belief. I run across a fair number of people who similarly feel that customer input and understanding is a waste of time, and prefer to move forward with determination that hard work and “just shipping” will pay off. I choose to keep investing in and working with leaders who are confident, yet eager to learn and improve. This is a personal bias that has helped me and others succeed in innovation in the past. If that’s you, look me up.

Oh, and let me ask a final favor:

+Bob Gilbreath

It is an amazing experience to spend one’s day hearing about entrepreneurs’ startup ideas. Between people pitching our fund, startups interested in my Minimum Viable Concept Test, and  friends-of-friends who are looking for advice, I have something like 10-15 first-time conversations with entrepreneurs each week. One of the first things you notice with this perspective is that ideas are easy, but actual success in the marketplace is brutally tough. I believe it’s time for prospective founders to make their ideas “harder”, so that execution and getting to success is much easier.

Entrepreneurs (and those who long to join them some day) have a very rare ability to recognize problems and come up with solutions. Instead of taking life as it comes, they spend their spare time asking why things have to be the way they are. They dream of inventing a better mousetrap, improving the world, and collecting a nice reward for the effort. Ideas often stick in their heads, and it can as though the only way to get them out is to take a leap and start a company. And they are increasingly encouraged by others’ success stories and a growing startup support system of accelerators, incubators and hack-a-thon events.

Then these entrepreneurs come to people like me, who have hard questions, push back on assumptions, and encourage them to show some proof that their ideas have merit. This is where the frustration starts to come in. Investors “don’t get it” and getting funding can feel like an unfair game. Those that do receive financial backing and bring a product to market usually discover that finding developers, users, customers, and press coverage is much tougher than they ever imagined. After struggling mightily for months or years the money runs out and most call it quits.

Founders are almost always “Idea People.” I have found that Idea People are actually pretty rare, and we desperately need them to invent the future. But here’s the other thing about Idea People: They churn out ideas non-stop–and we would all be better off if they let some great ideas fall to the wayside and refocused their thinking in areas where they have a much better chance of creating a company.

Let me try to describe the issue by borrowing an example from the advertising industry where I recently worked. Imagine that you are the creative team for Old Spice and charged with coming up for a new TV commercial. Now, go! Start coming up with ideas. C’mon. I’ve got all day….Done? Well, chances are that you drew a blank.  And if you did come up with an idea, how should we judge it? Will it both entertain and move cases of body wash?

In the real world of advertising you start the ideation process with what’s called a “Creative Brief.” It is usually a 1-page document that describes the business challenge, an insight about the target audience, and a focused product benefit that your commercial must bring to life (hint: that’s how your ad delivers revenue). Here’s the summary of a likely creative brief for Old Spice:

• Business Challenge: Old Spice has a leading share of the Male body wash category, but most guys still don’t use Male-specific product
• Insight: Women do most of the shopping for husbands/boyfriends, and they don’t think that guys need something special
• Benefit: Old Spice lets him smell like a man (which is what she really wants)

By narrowing down the possibilities, the creative brief actually helps drive a better brainstorming session–it gives the idea team “a box to think outside of.” The brief becomes a roadmap for execution success–and the result can be pretty awesome.

Now, imagine a “creative brief” for startup ideas. Before brainstorming ideas, individuals and teams would start by similarly narrowing down the areas in ways that are correlated to success in execution.

Here are 3 elements that I wish every startup could hold themselves to from the start:

Do you have relevant expertise?

No matter how world-changing it may be, if your big idea lies in an area where you have zero experience, your odds of success just plummeted dramatically. It is incredibly difficult to get to know a new industry while starting a company at the same time. To borrow from Malcolm Gladwell: Use whatever it is you’ve spent 10,000 hours on perfecting! And it’s often not enough to just “be the customer” and design something for yourself. Further, every industry has rules, jargon, norms and processes that a mere customer doesn’t understand. Steve Jobs may have designed for himself, but the guy had worked on building software and computers for the masses since he was a kid. If you lack industry expertise, you at least should be able to develop or make whatever you idea is on your own. If you lack both, stop planning right now and spend your time recruiting a co-founder who can bring what’s missing to the table.

Can you can make money from the beginning?

The odds of coming up with an idea that gets oodles of users is very low for any startup. It’s even a bigger stretch to assume that you’ll be able to suddenly monetize the traffic down the road. It’s kind of like hitting the lottery two weeks in a row. So why not hold yourself to creating an idea that starts delivering revenue immediately? There is something amazingly pure about getting paid in return for creating value–it is the clearest and earliest sign of whether you have a successful idea or not. If your idea is hard to charge for directly, then you should at least have a clear revenue end-point that is directly related to delivering on your core service. For example: One of our recent investments, Roadtrippers, is a free travel planning service, but it makes money by taking an affiliate fee when users book hotels through the site.

Can you bootstrap this for a while?

Instead of jumping straight into a new idea by quitting your day job and taking investor dollars, I wish more founders spent time pushing their business along during off hours and with their own dollars. The earlier you are in the startup process, the riskier things are. And a big, ominous countdown clock starts the day you step away from your day job and/or take investor money. Every hour must be spent wisely to turn your idea into a viable business. That’s enormous pressure when all you really have is a great idea…

On the other hand, it can be very cheap to test your biggest hypotheses early on. One of the reasons I created the Minimum Viable Concept Test was to help founders learn if their idea has merit at a tiny fraction of the time and money cost of quitting work and developing a Minimum Viable Product. And don’t worry about some other startup taking your great idea before you leap.Remember, ideas are easy and execution is hard–chances are the other guys will become a failure statistic while you steadily plot away on getting the execution right.

Bonus Tip: Having all three of these is a great way to win over investors! You might even raise your valuation and reduce your need for investment dollars so that you get to keep more of what you build!

I actually went through this thinking process myself back in Fall 2011. As I wound down the successful sale of my company and prepared to leave, I had a lot of big ideas. One of them was a social media tool that could have rivaled Twitter and Instagram. I spent a few days developing the idea, laying our financials, building a pitch deck–and I even created a name and bought a URL. Then I took a step back and thought through the facts that I couldn’t develop this on my own, I wasn’t too sure how social media startups spread, and actually making money on the idea would take a long while. The idea might take off–but probably not if launched by me. So, with some sadness, I let it go.

A few weeks later I started assessing and coaching startups in my investor role at CincyTech, and I saw that we needed a better way to gauge success potential and adapt before the time and trouble of building a MVP. I came up with the idea for the Minimum Viable Concept Test because of my knowledge of and love for consumer understanding and research. I saw that investors and founders were willing to pay for the output of the test. And of course I bootstrapped it using my own savings and sweat equity. I found the great idea that’s right for me, and things are working out nicely.

Ideas are infinite, but actual marketplace success is far from it. So be tougher on your big ideas, so that execution and success is much easier down the road.

Bonus: If you like this post, or if you think I’m full of it, check out a similar point of view on “12 Rules for Building Your First Profitable Startup.”

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

I have a very unique perspective on the world of startups. I’ve built and sold a company, personally invest in startups, serve as a startup advisor and board member, work as an entrepreneur-in-residence at a VC firm, and I’m married to an entrepreneur. Plus, I’m now founder of a startup that helps other startups succeed. Despite being waist-deep in this culture, some of my biggest insights come from reading the words of other startup leaders.

A few days ago in the terrific blog over at On Startups, guest poster, Paul DeJoe, wrote a piece on “What It’s Like To Be The CEO: Revelation and Reflections.”  I’ve read dozens of books and thousands of articles about life in a startup, but this is perhaps the most insightful perspective of what goes on inside the head of a founder. I felt one passage in particular to be very moving:

You feel like a parent to your customers in that they will never realize how much you love them and it is they who validate you are not crazy. You want to hug every one of them. They mean the World to you.”

I remember selling to customers for the first time when I was a little boy. My family took a trip to the beach and my sister and I came back with a giant jar full of seashells. For some reason we decided to put up a card table on the front lawn and started a “Shell Sale” (say that 3 times fast!). Neighborhood kids suddenly appeared from nowhere on bikes and began handing us nickels, dimes and quarters. I was astounded by the rush of pleasure from seeing people happily pay me for what we had gathered. I was hooked on business and entrepreneurialism.

Since then I’ve spent a career producing and selling. Most of this has involved me personally pitching a product or service to another businessperson. And even when I worked at P&G on Tide, which is bought by 50 million nameless, faceless “consumers” per year, I often read their individual letters, emails and discussion board posts to get some real-world feedback and keep my finger on the pulse of their needs and wants.

But I have found that selling as a startup founder is a very different and deeper experience than working on a big brand or even in a traditional small business. As my hero Steve Blank describes in the short video below, startups are small businesses that aim to change the world…

Selling Validates Your Bet on Changing the World

When you aim to change the world, the odds are much longer than, say, opening a coffee shop or starting a consulting business. Not to denigrate these efforts at all, but startups represent completely new-to-the-world business models. Startups are a hypothesis, and the ability to convince customers to turn their dollars over to you for the first time is the ultimate test of your baby.

Every time I win a new customer for the MVC Test I feel like a new burst of wind is in my sails. It is especially encouraging since my service really has no traditional competition or established budget to draw from–meaning that my customers are handing over “new money.” Most have barely spoken with me, are already on shoestring budgets, and have no firm proof that my test output will deliver a ROI. My ability to convince them, and their happiness with the output (whether their MVC Test results are great, poor, or somewhere in between) makes me feel like I must be doing something right.

This is the biggest reason why I believe most startups should begin life with a true business model, and actually charge people for the value that they are providing. There is simply nothing more powerful than market forces to hone your approach, and until you make money, you have no real market.

You Gain Pleasure in Customers’ Success

The feeling of progress through customer acquisition motivates most startup leaders to provide impeccable levels of service. Since we feel a personal connection to our customers, and their patronage is positive feedback on our businesses, we want to do as much as possible to help them win. We begin to feel a symbiotic relationship and see our success linked to their success.

I find that helping other startups succeed is 10-times more special than my previous role working with some of the largest companies in the world. Just last year I was working with the global CMO of a multi-billion-dollar consumer goods firm on a project critical for its long-term success. While it seemed sexy and was certainly an incredible challenge, I get so much more personal value working with startup founders. You see, this giant company (like most) was slow, bureaucratic, and likely to sail the current course no matter what strategy recommendations I came back with. This global CMO could fail and still move on to any number of high-salary positions somewhere else. It just wasn’t personal.

But working with startups is a much higher calling. These people are putting their life savings and family relationships on the line. And when you provide advice, they actually listen–and put it into action the next day! I probably work harder to craft my recommendations for startups paying the equivalent of 1% of the budget of those global CMOs, because it’s personal for everyone involved. When they succeed, you feel like you had a real hand in their win. And they will often repay you with help and loyalty for life.

There Really Are No “Bad” Customers

Back when I was the client service leader at our digital agency, from time to time we would have a client that would put us through the ringer. I’ve had clients berate my team and I in public, threaten to fire us, and then go out of their way to bad-mouth us within their organizations. This can be extremely painful when you know that this can literally take food off your family’s table, and seriously hurt the career of someone who really was at no fault. Whether it’s a strategy consultant or a restaurant waiter, those who serve often become the scapegoats for someone else’s screw up, low self-esteem or bad day.

Everyone faces this at some point, but the true test comes from whether you can respond with emotional intelligence. I remember hearing about a competing ad agency that brought an old car to their parking lot one day, spray painted “CLIENTS” on the hood, and gave employees a chance to swing a sledgehammer at it to get their frustrations out. I often told this story to my staff when they were feeling at their lowest because of a challenging client. “There are no bad clients,” I would repeat to my team, “They pay our salaries, and we must find a new way to crack their code.” After all, the agency that pulled the sledgehammer stunt later fell off the map and became a shadow of its former self.

Of course you should not aim to keep every customer. I’ve had to “fire” clients who treated our people unethically or refused to accept that we needed to run a profitable business, too. The latter issue is where most startups can be blinded by their love of customers. Those customers who angrily demand price or service at an unreasonable level are easy to cast aside, but we often miss the “nice” customers who simply don’t contribute to the bottom line.

I have a few customers that are unprofitable now and will likely never cover my investments in finding and serving them. But that’s my fault. Each one is a learning experience–a chance for me to reflect, adapt, and get it right the next time. And if you provide the same, high level of service to an “unprofitable” customer you just might make up for the loss when they recommend you to a few dozen others in this increasingly small world.

So I offer humble thanks to my customers, and pledge to continue a win-win relationship that leaves us all successful. And I hope you hug a customer today,too! Thank them for their support, trust and budgets–and don’t forget about them when you hit the big time.

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath