Discover your market!
Thomas Funke is a busy man. He’s the co-founder of the Entrepreneurship Center Network (ECN) and the Research Studio eSpark, and has led both initiatives over the past two years. While he is still a lecturer at the Vienna University of Business and Economics (WU) and supports ECN, he has moved on to new things. Today, Thomas is working on his own startup dasLaufrad, a marketplace for kids’ fashion, as well as for a Think Tank of the German Ministry, coordinating the startup activities of all state-supported entrepreneurship initiatives in Germany. The Vienna Business Agency has invited Thomas to hold a workshop, part of the Twin Entrepreneurs series, on 21 October in Vienna. We caught up with him to find out more about what to expect.
What is your background in the topic?
For quite a while it’s been university background – I wrote my PhD thesis on the interaction between customers and companies, and in the meantime, I worked on the topic in a practical way. Two colleagues and I developed and taught a course called Garage, where students from different disciplines can develop their own ideas, and we implemented the concept of customer development and the integration of customers into product development. We taught this course for a couple of years, so I have a lot of theoretical knowledge. We did a lot of research on that, and we all did our PhD theses on the topic.
What’s more, I also try to implement customer development in my own projects, [one of which] is a marketplace for kids’ fashion. We’ve developed it over the past year. What we did very intensively was not just bring out the product and think about its features, but we also talked to a lot of the customers, did customer interviews and thus implemented the product-market fit.
What are some of your latest projects?
The project I mentioned before is called dasLaufrad and is a startup that I co-founded. It’s a second-hand fashion marketplace for kids, where people can send us their items, and we price them, we take a margin and resell them. It’s a little different from the other marketplaces out there like eBay because people don’t have to put the products on the platform themselves – they don’t have to take the pictures or manage the communication with the customers. With that, we target customers who don’t want to spend too much time selling their own stuff.
It’s going quite well and in Austria, we have a lot of clothes that are being sent to us and resold. We’re in the beta version, and we’re also launching in Germany this year. What we’ve noticed is that German customers seem to be more likely to buy kids-clothes on the internet. On the Austrian website, half of the unique visits are from Germans and half of the orders we have are from Germans as well, although they have to pay higher fees for sending the clothes and we haven’t targeted Germany with our marketing activities yet.
What should participants expect from your workshop?
The first thing they should learn is what customer development and product-market fit are. I always think people know that they have to talk to customers, but many of them don’t. Whenever I give workshops I’m surprised that people still think that they have to sit in their garage and develop the product on their own, without getting out on the market. My goal is to spread the awareness of how valuable customer development is and how important it is to get out there early.
Secondly, I will try – in a practical way – to show participants how it is to interact with customers, how to ask the right questions and how to retrieve the information that is important to them. I’ll try to give them the tools and methods to actually do these customer interviews and to discover who their customers are.
What part of the workshop will be theory and what practice?
It’s twofold – first, participants should understand what customer development is, and second, they will get to know how it works. They should really try it out and improve their projects by doing so.
My goal is to push participants towards the topic. This means I want to give them the background, which is a bit theoretical – but this should not take more than a third of the session. The rest will be rather hands-on. I want to help participants by giving them practical examples of how customer interviews are done, and how to ask the right questions.
Speaking of the product-market fit, the lean startup methodology comes to mind. Would you say the lean startup is something new or is it rather an iteration of already existing techniques?
Innovation and theory are always a recombination of existing techniques; and it’s the same with the lean startup methodology. Overall, what is new is that people look at the process of how to start up. It’s not about the lean startup that is new – prototyping and iteration are terms that have been used for ages, rather it’s more of a recombination of existing approaches, which now has a new brand – the lean startup methodology.
Let’s not forget that entrepreneurship has only been a discipline in itself since 2001; before that it counted towards business administration. If you take the German language, there is still no differentiation between the terms entrepreneurship and business administration. There is only the word Unternehmertum. Of course this is just the language, but it tells a lot about the culture. Sometimes it seems to me that there is no differentiation made between managing a bigger company with 50-100 employees that has been operating for 20 years, and founding a company. The lean startup movement is coming over from the US, because there, people have been thinking about processes of how to found companies for much longer than we have.
What I don’t like about this methodology so much is that everybody puts it in the centre and says everythingneeds to be lean. Sometimes I have the feeling that people even use it as an excuse to not think about their product themselves anymore. Or it means you have to talk to at least 20 customers and discover the needs of your customers before you actually start building something. And this might often take weeks, and lead to you losing the vision of your product. You should not get lost in the process itself, but you take it as additional information for yourself – it should not hinder you to move fast and develop your product by yourself.
In the last workshop I held, one participant had focused too much on this, and in the meantime a competitor had launched already and had its first customers.
What are some main traps for startup in the stage of testing the product-market fit?
There are several main mistakes that people make in this stage.
1. People go through the customer development process but they are so convinced of their product that they do it just because they have to. They don’t listen to the customer but rather try to tell them how the product should be. The customer, in turn, is not able to give constructive feedback.
2. Even though they’re willing to get the information, startup teams don’t get it because they don’t ask right. They’re asking suggestive questions, implying the answer already within question. It’s a lot about the technique of how to ask questions.
3. Another trap startups fall into is putting too much emphasis on the customer development process, which means that they take the customer, put him in the centre of their attention and believe that whatever the he says is right.
How long until you have your product-market fit?
Customer development sets milestones. First, there’s customer discovery, then customer validation, customer creation and at the end comes company building. So there are certain stages that you need to cover, but it’s very important to understand that this is all a flowing and ongoing process. You don’t need to [check off] stage one to move on to stage two.
What is your take on the criticism that testing a minimum viable product can lead to bringing products to market that are not yet good enough?
As I said, you shouldn’t take the lean startup approach as the Bible – meaning develop an MVP, throw it out there and see what people have to say. Of course, there’s a difference between Europe and the US. In the US, it is more about trying things out, and it’s okay to make a mistake and they have a couple of features wrong. Here in Europe, people are less failure tolerant. When you bring out the wrong product, they [your customers] might not come back.
With the customer development and the product-market fit workshop, I wouldn’t say it’s the lean process that I am trying to teach. It’s more about developing a product based on a customer-oriented view. The lean process is on moving fast, throwing an MVP out there and getting feedback. I’m trying to put more emphasis on the fact that you need to develop your product together with the customer.
What are some startups that do their customer development well?
Don’t miss his workshop – the date is 21 October!
Twin Entrepreneurs is a cross-border initiative aimed at providing practical assistance to startups from the area of Vienna and Bratislava that want to make the second step – sustain their business and expand abroad. The series is supported by the Vienna Business Agency, the European National Agency for Development of Small and Medium Enterprises and the Young Entrepreneurs Association of Slovakia.