I was in a pitch meeting once with a smart guy who was looking for funding for a new mobile app. He had a partner, they had a business plan and a slide deck, and they seemed to have all the answers. There was something about the pitch that bothered me, but I couldn’t figure out what it was.
About fifteen minutes in, I realized the problem. These two genuinely thought they had all the answers.
I immediately flashed back to some of my first pitches and could see myself in that exact same position, pitching a new idea and trying desperately to convince a prospective investor that this was going to work. I would spend hours preparing, trying to come up the answers to every question I might be asked.
It wasn’t until perhaps seven or eight years later that I came to understand something fundamentally important about a new business or product: You don’t have to have all the answers in the beginning. In fact, it’s virtually impossible to have it all figured out right from the get-go.
This led to an observation that has served me well through the course of multiple startups and consulting opportunities, and one of the core principles I use in analyzing any project or opportunity. It is far more important to learn to ask the right questions than to have all the answers.
The problem with this particular pitch meeting wasn’t the answers I was getting. It was that the answers alone didn’t tell me if these entrepreneurs were asking the right questions in the first place.
Example:
Me: How are you pricing the service?
Him: $19.99 a month.
Me: Why?
Him: Because people will pay that.
Ok maybe he’s right. Maybe he isn’t. But now this future company leader is trying to convince me that he knows exactly what people will pay for an app that hasn’t come to market and for which he’s done no testing.
A better conversation would be:
Me: How are you pricing the service?
Him: It’s going to be a subscription model. We believe we can provide enough value for people to spend anywhere between $9.99 a month and $29.99, based on similar products. Our goal is to hit $19.99 per subscriber.
Me: What factors will determine whether the market will bear the $19.99 pricing?
Him: Glad you asked. The things we need to figure out are:
…. (Hopefully a list of intelligent questions would follow)
If we can answer those questions, we’ll have our pricing figured out. We also have a roadmap of additional features to add value over time.
That would have been a pitch I could get behind. It would have shown me that this business leader knew he didn’t have it all figured out, but that he was smart enough to know where to look to get the answers.
One of the key ingredients of an entrepreneur or leader is the ability to predict, even ifonly a short way down the road.
This doesn’t involve tarot cards or crystal balls. It simply means that you have to be able to get an idea of how you think the market will react to your product. It means you should have some idea of where your project could go wrong, or what hurdles you might encounter down the road. If nothing else, you can look at past experience and draw some conclusions about how to change things going forward.
There can be multiple ways to do this. It sometimes comes down to pure gut.
In trying to predict the path ahead for any company, you have to work with three sets of factors:
a) What you know
b) What you don’t know
c) What you should know
It’s perfectly fine to not know things. In some cases it’s better not to know everything you’re getting into beforehand – you might not make the leap if you really know what’s in the pit. But once you’re there, you want to be prepared to deal with the traps and dig yourself out.
What often happens is a company spends too long focusing on what they know, and not enough time figuring out what they don’t know, and what they should know. The result can be a lot of time and money wasted because no one is confronting the difficult issues (i.e. the unknown), and then it fails because too much attention and effort went in the wrong direction.
Here’s how this plays out sometimes in software or app development.
Two developers came up with an idea for a digital product that was designed to connect customers to their favorite brick and mortar stores in a new way.
The developers had probably invested at least $40-$50,000 in designing an interface and creating a dummy app to show their concept by the time they pitched it for funding, and were hard at work building data structures and other elements that the app would need to function.
This wasn’t a huge surprise because both of the people involved were developers. They were playing to their strengths to prove out the concept. And a huge part of what they were doing was right. They were building what they knew. The problem is, they were only doing what they knew.
Here’s where they went wrong:
The success of this app wasn’t going to be based on whether these two could develop an interface. The success of the app would live or die based on whether enough retailers were willing to participate, and enough customers could be convinced to use their platform.
No one was confronting the tough questions. And the app never got off the ground.
There were only three questions they should have been asking:
1) What will it take to convince retailers to be on our platform?
2) What will it take to convince consumers to use our platform?
3) How are we going to do this on a large scale?
If they couldn’t come up with answers to these questions, the app would fail no matter how beautiful the design was.
To be fair, it was still vital for them to show a proof of concept and to have a design if they wanted to get investors. Part of the answer to the above questions could have been, “We’re going to attract customers through advertising and strategic partnerships, but we’ll keep them because the design is so innovative and easy to use, and it saves them money.”
My issue is that they shouldn’t be spending a dime on development past the phase of showing a proof of concept. All efforts beyond that should be focused on identifying and answering the tough questions.
They knew they could make a beautiful app. What they didn’t know was how to get adoption across multiple market segments fast enough to create a real impact.
So, what are the “Tough Questions”?
The Tough Questions in any business are the ones that make the difference between success and failure. Between growth and stagnation. Tough Questions are issues that will determine whether the company makes it to the next level or not.
I’m not talking about, “Where should we put our offices,” or “How many people should we hire in the next quarter?” Those are important questions perhaps, but not Tough Questions.
(An important question is one that can substantially impact the company financially, alter the company culture (good or bad) or that involves new market or product opportunities. And these have to be answered too. If one of those issues is so large that it could alter the entire course of the company (up or down), it becomes a Tough Question.)
What I’m calling out here as a key trait for any leader or executive, is the ability to identify and answer the tough questions. It can make the difference between success and failure of a company, and it can also greatly improve efficiency, because the company naturally becomes focused on addressing important issues and not trivial ones.
There certain Tough Questions that have to be answered by any business over the course of its first few months or years in existence, including:
a) Can we provide one or more products or services that people are willing to pay for?
and,
b) Can we provide a good enough product or service that customers come back again, or refer other people through good word of mouth?
Those two questions right there will determine a lot about the potential future of that company.
If you don’t eventually have something to offer that people like and believe has value, you won’t have a company for long. The basic principles of economics and exchange will collapse on you. And if people don’t like it enough to come back or refer others, they don’t really like it in the first place, no matter what they tell you to your face.
Some examples of Tough Questions that might come later in the life of a business could be:
a) What aspects of our products or services really separate us from our competitors?
b) How can we expand and reinforce that differentiation?
c) Our customer base is too small. Are there are other target markets we can enter?
d) We have a groundbreaking feature that will be a real game changer, but it all hinges on a patent we don’t own? Can we buy or license it? If not, this project can’t move forward.
e) Our biggest competitor copied our product and is threatening to put us out of business. How are we going to protect our company?
These are all examples of Tough Questions at a company or business level.
The core concept still applies to managers and even general staff.
A simpler example could be hiring on a new employee. I often see companies hiring for a Marketing Manager or a similar position, and the job posting requires that the person is an absolute expert at every possible aspect of marketing and design, can write perfect code in their sleep and speaks at least three languages. These people are rare, and are almost always out of the price range of the people posting the ad. But I digress.
If we really look at what the position requires, we could probably identify a couple of vital elements that would determine whether this person is going to have a future at the company. It would be great if they could do everything, but some things are much important. They are what the company needs as a solution to its pressing needs.
The best way to help this hapless Marketing Manager, who somehow got the job even though they only know how to do half the things on the list, is to identify and ask the Tough Questions (i.e. the ones that are going to determine whether or not they keep the job).
Most likely, there are only a few things that the company actually needs, and if the Marketing Manager can do these things, they will have job security.
In this case, it may be that the Tough Questions are simply:
a) Can you update our website quickly and competently with all the crazy changes and tests we need make on an hourly basis?
b) Can you help us figure out how to grow our online sales? (We don’t really care how.)
c) Do you fit in well with the team?
If no one figures this out and asks these questions, chances are things will go south, or it will be left to chance whether the new hire can figure out through all the chatter that this is really what they are supposed to be doing.
You would be amazed how many perfectly good work opportunities are squandered simply because the person in charge couldn’t figure out what they wanted in the first place. They couldn’t figure out the Tough Questions, and thus no one could provide them with any useful answers. All they knew was that, “things didn’t work out.” Chances are they won’t work out with the next fifteen Marketing Managers they try either, unless one of them is insightful enough to figure out the tough questions on their own and show their boss why they have value.
And this my friend takes us back to the top of the article – Are we asking the Tough Questions? Are we figuring out what we don’t know, and more importantly, what we shouldknow?
It takes quite a bit of insight and skill to figure out the Tough Questions, and often substantial fortitude to pursue getting good answers to those questions.
If one is able to correctly identify the Tough Questions and ask them, there still remains figuring out the best way to answer them. Sometimes the answers are obvious. Sometimes your customers will tell you. Sometimes you figure it out in the shower. Sometimes it takes months or years. All of those have happened to me.
But once you get that answer, you never look back.
You find the next Tough Question in your way, and you ask that one. If you can answer enough of them, you have a successful company or career. If avoid them, sooner or later the company or the job disappears.
I would go so far as to say that the success of a company lies in finding enough answers to Tough Questions. But you have to ask the question before you know where to look for the answers.
Here’s to choosing success.
