Customer is key, not the product

04/09/2020 - 08:00

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Too many startups and established businesses forget the importance of the customer.

Customer is key, not the product
Siobhan Lancaster says the Instatruck algorithm optimises shipments. Photo: Gabriel Oliveira

A coffee catch-up is a great way to connect over business, and I often first meet with a startup team in this way. I listen to the founder’s story, what they’ve got, and where they want to go.

Sadly, too many seem to have fallen into a trap; the same one I did when I set out on my own startup journey way back when.

Before I reveal what this is, let me reiterate that startups are hard. Trying to disrupt an existing industry, or create a new one, while introducing new technology on a lean budget, is difficult. Most will not succeed.

There are many things that can, and often do, go wrong inside tech startups.

• Too much spent on the product.

• People or founder issues.

• Too late or early.

• Lack of funding.

• Failure to scale.

• Not pivoting or bad pivot.

• Splash the cash.

• Not confronting reality.

• Bad territorial expansion.

• Lack of passion or grit.

• No defensible IP position.

• Infringe someone else’s IP.

• Too small a market.

• Can’t get a good tech team.

• Pricing/cost issues.

• Poor marketing or user interface.

• ‘China number’ syndrome (believing a huge market will be enough).

What I and many other startup founders forget to concentrate on is perhaps the most important factor: the customer, not the product.

I want to hear loud and clear who the paying customer is, what problem they have, and how the tech will solve this problem.

If the customer problem is clear, large, and the customer is willing to pay the startup to remove that problem, then they have a business.

Value is thereby created for the customer, and price will rarely be an issue.

If the startups can deliver this at scale, then we could have another Canva on our hands.

Good customer problems

I failed to grasp this simple fact more than 20 years ago when I launched my startup.

Our team developed a very cool map-based real estate website for homebuyers and renters, but they were not our customers.

They were our users.

Real estate agents were our customers.

We had to find out what their problems were.

The answer surprised us: it was more about winning new listings than making sales.

‘List and last’, as they say in real estate.

It was a light bulb moment.

Tom Young is the founder of udrew, the winner of WA’s Innovator of the Year in 2019.

The former structural draftsman was astounded by the complexity in gaining planning permission for a home improvement project.

“I submitted the plans to the local council,” Mr Young told Business News.

“Seven and a half months later we had our approval documents.”

But there was a problem.

“They’d spelled the street name of the property wrong, so I was told to halt all renos, which led to a 10-month delay,” he said.

Mr Young said udrew could automate this whole planning and approvals process, in minutes.

In the transport sector, Leederville-based Instatruck has been described as the ‘Uber of Trucks’.

A 40under40 winner in 2017, Instatruck founder Siobhan Lancaster developed a platform to better match delivery demand with fleet availability.

Basically, she said, trucks often sat idle despite businesses needing loads delivered across town. Matching the two was the trick.

“More recently, we’ve discovered an even bigger problem,” Ms Lancaster told Business News.

“Enterprise customers find it difficult to optimise their daily shipments quickly and easily. So we built an optimisation algorithm that solves this.”

The co-founders of local agtech business Laconik, Darren Hughes and Wayne Pluske, have more than 50 years’ combined experience in agriculture.

“The problem [for broadacre farmers] is simple,” Dr Hughes told Business News.

“Fertiliser is the single biggest investment a farmer makes in growing a crop and they don’t know its ROI.”

Laconik uses data science to provide farmers with a recommendation, specific to the crop and soil, which saves fertiliser while maximising yield and profit.

All three startups have commercialised successfully and are on a growth trajectory.

Solve problem, got business

It’s the same for every business, not just startups.

Focus with laser-like precision on the customer problem, and how it can be solved.

If you do this, you are heading in the right direction, and may have a chance.

Charlie Gunningham is founder and principal of digital strategy advisory business Damburst.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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