Richelle Johnson

STARTUP WEEK 2020: Tips and Tricks for Market Research and Customer Discovery

The Techstars Alaska Startup Week op-ed series features entrepreneurs and entrepreneurial ecosystem builders sharing their thoughts and ideas on a variety of  topics related to startups and innovation. Techstars Alaska Startup Week is a week-long series of events hosted by entrepreneurs and business leaders from across the state. In 2020, all events are virtual, and you can find them here: Startup Week Schedule. All are welcome, please join us! You have an idea for a business and you shop it around to your friends and family to see if it’s a really great idea. Have you found yourself asking someone or been asked by someone, “I have this great idea for [insert business idea here]! Do you think it’s a good idea? Would you buy my [insert product here]?” This is about how you respond to these questions, and what you say to a friend or stranger when they ask you them. Probably something like, “Sounds like a great idea!” or “Sure, I might buy that.” But does your response actually give this person any valuable information to test their idea?  That is the challenge of doing market research and customer discovery. In Alaska, 18% of businesses close their doors in the first year. Post-mortems of 101 failed startups listed lack of market need, user unfriendly product, ignoring customers, and timing as common reasons for failure. Thorough customer discovery and market research can make chances of survival or pivoting easier for startups, and help enable longevity.  Customer discovery and market research are two separate processes but are equally important to the health of a business of any stage. Market research is the process of assessing the scale of your industry in any given geography, the market share of your competition, and estimating your number of customers. Market research is frequently, but not always, data driven.  It helps you understand the landscape you are operating in. Are you one of five coffee shops in a given area, or one of 20? How many businesses or households reside in the immediate area? How many cars drive by each day? These are important questions to help you identify your business's place in the market. Customer discovery is the process of fully understanding your customer: their wants, preferences, challenges, and characteristics. Knowing your customer helps you, the entrepreneur, understand the key aspects of your product or service.  But it is not just understanding who your customer is, but also testing your assumptions about them. The process requires detailed investigation and looks at the why, diving deep into the factors that drive potential customers.  The problem that most entrepreneurs face is that while most know they need to do their research, many do not do it enough or at all. The work required to constantly analyze, interview, self-evaluate, and repeat is exhausting. On top of that, data can be scarce for small businesses lacking resources to collect their own.  The reality of market research and customer discovery for startups is that it is most likely going to be difficult. Large companies have the resources to collect data on a grand scale, with systematic interviewing, focus groups, and surveys. For small businesses and startups, the process requires talking to a lot of people combined with a fair amount of creativity.  Here are some tips and tricks for conducting small scale customer discovery and market research in Alaska: It is impossible to talk to everyone and that is okay. The quality of the interview is more important than the quantity. A handful of fantastic, detailed interviews will always be better than 20 surface level interviews. While it's good to set goals for the number of interviews you want to conduct or survey responses you want to collect, it is important to be flexible with the targets you set for yourself. Consistency is nice but not if it is a constraint. Research interviews can take many forms and vary in structure, but customer discovery experts advocate that open-ended, semi-structured conversations are often the best for determining customer needs and opinions. If you are working off a list of questions do not be afraid to dive deeper. If a potential customer says something that sparks a follow up question, ask it.  It is okay to compare yourself to others. Learning from the experiences of others is a powerful tool to enable resilience, especially businesses. When you are working in a data deprived environment, with little information to be gleaned from your immediate surroundings, it helps to expand your focus. Are you opening a bike shop in your town and have no clue what your expected revenues, customer traffic, and service demand might be? Examining similarly situated towns with recreational opportunities can offer key perspectives and inform your decision making. Learn from the big guys. If you are a startup entering an established industry, even if the product or service is unique, information can be gleaned from the market research conducted at a large scale. Information on global or national industry growth trajectories, consumer demographics, and more can shed light on trends happening at the local level. You are never done learning. Thinking customer discovery or market research is something that only happens at the early stages of business development is a mistake. If you just do it once you are freezing your business or startup in place. Customer preferences and markets change constantly, and the information you gather to inform business decisions needs to keep up with those changes. If you are collecting information as your business evolves you know better if you need to make modifications to your product/service or pivot.  And finally, there is no one right way to conduct customer discovery or market research, and talking to strangers is not always fun. The need for information and the method for procuring it depends entirely on the business, the industry, and the entrepreneur. But the need for information is universal and it is an important component of business health. So, do your research. Richelle Johnson is a life-long Alaskan and Lead Analyst for University of Alaska Center for Economic Development.

Startup Week 2018: Women and Entrepreneurship in Alaska

49th State Brewing Co.’s theater buzzed with excitement. Not because a casting producer from Shark Tank was visiting Alaska for the first time (she was, and loved it), not because of a giant blow-up shark “airswimming” above the audience (although that was pretty cool), and certainly not because of the generous prize money (there wasn’t any). But because all five randomly selected competitors for the Vitalize Alaska Pitch Competition were women, and each of them gave a dynamic, compelling performance — some said the best overall showing they’ve seen in Alaska. This is not the only story of entrepreneurial ladies leading the field in Alaska. For those of us working in Alaska’s entrepreneurship ecosystem it feels like the male dominated world of entrepreneurship is changing, and recently released data corroborates this feeling: Alaska leads the nation in percentage of women-owned employer firms. Nationally, the number of women owned businesses is expected to increase 1.5 times faster than the average; however, women are still struggling in key areas that can have weighty impacts on business growth and outcomes. A 2017 report by the U.S. Senate Committee on Small Business and Entrepreneurship, Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive, identified 3 key areas: Few role models and a lack of mentors that contribute to the perception that entrepreneurship is a male-only endeavor. A gender pay gap that hurts the ability of women to be successful entrepreneurs. Unequal access to startup funding and financing streams that leave women with fewer credit options and a small portion of venture capital. Mentorship On the mentorship side of the equation, 48 percent of female founders report that a lack of available advisers and mentors limits their professional growth. A lack of mentorship can seriously hamper the creation of new businesses and business growth. Service Corps of Retired Executives (SCORE), a non-profit mentorship organization, recently found that entrepreneurs with mentors are five times more likely to actually launch businesses than those without. 60Hertz Energy is a computerized maintenance management system for power plant operators and energy professionals. Founder Piper Foster Wilder says that mentors have been invaluable to her strategic and financial decision making process, and that her experience has been largely free of gender bias that would prevent progress. “I’ve been taken seriously and supported by a lovely circle of men who primarily compose the investor community here,” says Foster Wilder. “On the other hand, those I’ve turned to when most vulnerable or unclear about terms, or unaware of how to proceed have been women.” Pay gap impacts According to Tackling the Gender Gap, “researchers have found that college-educated women make about 90 percent as much as men at age 25, but only 55 percent as much at age 45.” Considering that the Kauffman Foundation says the peak age for a woman to start a business is between 45 to 55, many female entrepreneurs have already experienced decades of wealth discrimination by the time they launch their first business, placing them at a disadvantage in terms of self-funding with savings or pursuing traditional debt financing. In Alaska, the gap is closing. A 2018 US Bureau of Labor Statistics report says that in 2017 Alaskan women earned about 81.8 percent of what men earn. Funding imbalance According to Fortune, nationally women receive around 2.2 percent of all venture funding, and women of color are awarded an even smaller fraction of that at 0.2 percent. This is a statistic that finds parallels in the realm of traditional funding as well. Women receive just 16 percent of all conventional small business loan, and 4 percent out of the total dollar amount awarded. Katherine Jernstrom, a local investor and founder of The Boardroom. (Courtesy Photo) Despite the funding imbalance, studies have shown that women-led companies funded through venture capital processes see a 41 percent higher return on equity and 56 percent better operating results. Katherine Jernstrom, a local investor and founder of The Boardroom, says female entrepreneurs and female investors bring different sensibilities to the table. “In my experience, women tend to have a better ability to listen and learn, and they communicate and ask for help more frequently. This leads to highly coachable entrepreneurs who are open-minded and flexible to feedback and change. Conversely, arrogance and defensive behavior is a quick way to kill a company (and a relationship with your investor)." And yet, optimism! The data shows that change is happening, albeit slowly. Although women-led businesses report higher returns on investment and better than average operating results, persistent obstacles appear to limit growth in the number of women-owned businesses. The gaps in the entrepreneurial network indicate major hurdles for women to overcome on their road to success, hurdles which add an additional layer to an already difficult road for entrepreneurs to travel. So the question that remains is how to change that? Individuals within the entrepreneurial ecosystem (or with resources to contribute to the entrepreneurial ecosystem) can make a significant impact with small changes. Use the resources out there. Although it’s just one organization among a whole host of local resources, the Alaska Small Business Development Center offers technical assistance and business consulting to clients. Women looking for mentorship or business guidance should reachout. Think about using your resources. If you have business or industry experience, think about becoming a mentor. If you have funding resources, think about becoming an investor. But also, if you know a female entrepreneur support her where you can. Encourage her, provide support, and add connections to her network. Cultivate a culture of inclusion in the ecosystem. Dedicated resources designed to encourage female entrepreneurship and support women-owned businesses, including advising and programming, could expand the network for women entrepreneurs. Greater recognition of the barriers to entry for women entrepreneurs through public education could serve to reduce the biases they face. For more information on the research discussed here check out the University of Alaska’s recently released Women and Entrepreneurship in Alaska brief. Alaska Startup Week is an opportunity for entrepreneurs to connect across the state and is a collaborative effort by multiple organizations to diversify Alaska’s economy, largely led by entrepreneurs. This year, Alaska Startup Week has grown from three communities to ten, with over 70 events in Anchorage, Fairbanks, Juneau, Sitka, Kenai, Soldotna, Palmer, Bethel, Homer, and Seward. Alaska Startup Week is on Facebook. Richelle Johnson is the Lead Analyst for the University of Alaska Center for Economic development where she uses her expertise in quantitative analysis, economics, and research to advance economic development on behalf of CED’s clients and Alaska’s entrepreneurial ecosystem.
Subscribe to RSS - Richelle Johnson