Masters of Scale Episode 1:

“In order to scale you have to do things that don’t scale.”

The purpose of this blog is to offer a summary of the key points of each of the episodes of Masters of Scale, together with a few insights. In the first of the series, Reid Hoffman talks to Bran Chesky of AirBnB about getting early customers.

I think it is a great example because we all know AirBnB as a tech-industry giant now, but like most startups it was not easy in the beginning. The founders had maxed out on their credit cards and only had a bout ten to twenty users. Their strategy: really get to know these users and what they wanted (and did not want) and hunt down new users one by one. Was that scalable? Definitely not - but it allowed them to build a firm platform off which they could then find more automated ways of getting new users - and they could not do that until they were sure they knew what their customers really wanted and loved.

Key lessons:

1 Get personal  and detailed feedback from you early customers as early as possible - that mens talking to them.

2. Use judgement in terms of what you take on board - you should not try and implement everything you hear.

3. Understand what might be the perfect user experience - and then try and build in an appropriate level of "magic" to your product. (Click the link if you would like a free tool to help you design the experience: "the 11 star customer experience template"

4. Do not start with a product that is immediately scalable (it will probably be wrong anyway), but using Chesky's words: "Do everything by hand until it's painful". There are plenty of examples of founders using their own phones or emails as the primary customer service touchpoint.

5. Designing a customer experience and scaling that experience are two different skill sets.

6. When you finally do reach scale, do not lose the ability to innovate as you did in the pre-scale phase. Large organisations quickly kill innovations that do not look operationally efficient.

7. I really like this final point they make as it resonates with so many of our early stage entrepreneurs. If you are "pre-traction" - do not despair. This is the best opportunity you will have to really design a product that your users will love. The impact you can make at that pre-traction stage has the potential to have a massive multiplier effect on the future of your business.

Pulling these ideas into "lean startup" thinking, we offer the basic diagram below as a guide:

For those looking for another example of gaining customers in a non-scalable way, have a look at this article (and the additional material below):
"Why I spent hours conducting research for my first clients - before I was paid a dime"

Tip for university entrepreneurs/professors:

If you are going to start a business at university (while you are studying), select your initial market in close proximation such as other university students, people in the community or local businesses. This will allow you to far more easily "do things that don't scale" with early customers than if they are difficult to get to.
For more about our programmes for universities, visit: Mashauri for Universities.

Look out for our next article from the Masters of Scale podcast, coming soon:

"Always raise more money than you need."

You can listen to the podcast by subscribing at Apple iTunes or the Android store; but you can also go to the website at Masters of Scale and listen to the podcasts.

Additional material only for those seeking more in-depth knowledge and cases on doing things that don't scale.
(This material is not part of the podcast.)

Doing things that don't scale - part II

A few years ago, Y Combinator launched an excellent video series on starting startups. In our old Mashauri site, we ran a series of blogs on the series (similar to what we are doing on Reid Hoffman's podcast). One of their videos was on "doing things that don't scale" - so we have reproduced the article (with video) below for those readers who want an even more in-depth look at the topic.

This is an interesting video lecture with 3 different speakers:

> Stanley Tang from DoorDash – a company that undertakes deliveries for small businesses. Stan discusses doing things that do not scale.

> Walker Williams from Teespring, a startup that makes T-shirts for organisations without “risk, cost or compromise” – you can see our previous blog on Teespring at Teespring Case Study. Walker also discusses doing things that do not scale

> Justin Kan, founder at Kiko and Justin.tv, talks about the tactics of getting publicity.

If you are short of time, I would listen to Walker Williams first, then Stanley Tang and finally Justin Kan. Although Justin has some interesting views, most are pretty straightforward and may be less relevant for early founders – but you can skim our notes below and make your own call on what you watch.

Here are my key take-aways from the video lecture:

Stanley Tang: DoorDash

> Get the most minimum “minimum value product” out there – especially if you are not sure if there is a real market (and that goes for most of us).

> Mashauri caution – we recognise that not all products can be entirely basic if that does not allow you to deliver a good customer experience; so work out what really is the minimum for you. The advice in this video though is that your product requirements are probably far more basic than you think.

> Remember that if customers do have to struggle a bit to do what you want them to do, if they still try then it is probably a stronger sign of an underlying, unmet demand.

> Do not worry about automating your product or delivering seamless service at first. Rather use the method of simply doing it yourself. Not only is this cheaper in the short-term, it also prevents you from building things that people do not want. The example is the founders taking calls and making all the deliveries themselves.

> Another big advantage in doing it yourself is you get to understand what is really required before you build the model. It plays to a previous lecture where the advice was to become a real expert in what you are doing.

> Finally, Stanley reminds us that doing it all yourself is a competitive advantage you have against more automated customers. You have the chance to deliver a really tailored service and get instant feedback.

Walker Williams: Teespring

Walker focussed on three areas - we summarise each in turn below:

Finding your first users
Turning those users into champions
Finding product/market fit

Finding your first users

It is really tough to find your first users and there is no silver bullet. It all boils down to the founders spending time and effort. It could be sending hundreds of personal emails, sitting on the phone or trawling events for people to talk to. It is simply a hard slog – but “scrappiness” is what makes good entrepreneurs.

Do not think in terms of ROI when winning these customers – you will spend huge effort for limited numbers in return. Just make sure that you have users who really value your product (if possible, DON’T give it away for free).

You are probably going to be bad at selling, you will not really understand customers pain points and do not even have testimonials or cases to help you. Tough it out. (Or as I overheard a friend saying to his daughter: “suck it up princess”)

It will get easier as you get more users; but certainly for a long time the way that you win new customers will not be a scalable strategy.

Turning your first users into champions

Delight your users with an experience they have never had before and will remember – do whatever it takes to make this happen.

Spend as much time talking to customers as possible – and really listening. Answer all mails and queries yourself. Scan social media to find out what they are saying about you – and if something goes wrong: make it right!

Proactively reach out to those customers who leave. If you cannot get them back, at least you can find out what was wrong and do something to stop others leaving for the same reason

Finding product/market fit

Realise that the product you finally ship is unlikely to look much like the one that takes you up to the point where you think about scaling – so do not get too fussed about perfection. Speed is more important than a clean product.

A rule of thumb is only to worry about the next order of magnitude of customers – so when you have ten users, think about the next 90, not the next 900!

Do things that do not scale for as long as possible – keep talking to users, keep iterating as fast as possible; only give up doing un-scalable things when it is finally “ripped from you”.

Justin Kan: Kiko and Justin.tv

> Be aware of what you are trying to achieve with public relations – that should guide everything from resource spent to the media that you target.

> Remember, outside of achieving specific goals (eg awareness in a certain town among a certain sector), the rest of publicity is just vanity. Something that makes your mother happy.

Justin is a successful entrepreneur and his advice is not bad, but unless you are specifically looking for publicity now, you can probably skip this part of the lecture.