$100 – Spend It Wisely

Economics – one word guaranteed to turn off most people. Not for naught is it called the “dismal science.” Personally, I love economics, because it teaches me how people behave. As a business person, as an executive, as a consultant, that insight is incredibly valuable.

So if economics is dismal, how do I get the learnings across without making people’s eyes roll (or head straight for Facebook on their smartphones)?

Simple: don’t call it economics. Call it anything but economics. Let’s call it the $100 test.

Yesterday, William Mougayer, a well-described excellent curator of material, launched his site, “Startup Management.” In it, he has links to (sometimes contradictory, but then again, so is life) material to help people run startups, which are entirely different beasts than running existing companies. One of the great links is to an article by Karen Catlin, called the “$100 Test“, which describes how to find out what people really want.

You are running – or planning – a startup. You have a great idea for a service or product, but before you spend months or years of your life, and a lot of yours and your investors’ money on it, you want to be fairly positive that people will actually use your product, i.e. it will be a commercial success. This is the basis of Steve Blank’s Customer Development methodology, and it makes a lot of sense.

There are two main problems:

  • Talk is cheap. Sure, people will say, “yes, I like it,” they may even say, “sure, I will use it,” but those words don’t cost them anything. They may also be telling a “little white lie” in order not to offend your feelings (something of which I, too, am guilty… unless I am paid by a client, in which case my fiduciary responsibility overrides my desire not to offend my client’s feelings). 
  • You are biased. As I said in my earlier post, we are all human and subject to confirmation bias. This is difficult in life, but deadly in a startup.

How do you get past these two issues?

  • Use economics. Uh oh, there is that word again. Before your eyes roll (mine already have), remember that all economics means is “the allocation of scarce resources.” Talk isn’t cheap… it’s free! Make the user respond with something that costs them, and is preferably measured, and the problem is significantly mitigated. Karen Catlin did it by giving a fictional $100 to each advisory board member to spend on feature requests as they see fit. By making the advisor (or customer) choose how to spend a limited resource ($100), she could get prioritized feedback. 
  • Use metrics. Getting feedback is good, getting prioritized feedback is great, but getting graded, measured, metered feedback is the best kind there is. Since each advisor (i.e. customer) could allocate the $100 any way they wanted, Catlin got customers to give her the measure, the value in each feature.

Last but not least, do not let the person in love with the idea, not the person who hates the idea, evaluate the feedback. Get a trusted friend, mentor, advisor, or partner to look at the results. After all, it is not the data but how you interpret them (yes, data is plural) that matters. In the famous words of Mark Twain (who attributed it to the British Prime Minister and quipster Benjamin Disraeli), there are lies, damn lies and statistics.


About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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