So far I’ve tried to lay the foundations for what I call the new entrepreneurial process—an approach to entrepreneurship with roots in design thinking, strategy in dynamic environments, and experimental processes that has been evangelized in several movements like Customer Development and Lean Startup. I thought I would try something different this time: give a concrete case study of the process. Then, we can drill down and more concretely identify traps that catch entrepreneurs and how they escape them. Let me know how you like this approach.
The Crime Reports Case Study
It was the process. Doing everything right was killing his business. It all started several years earlier when Greg’s apartment building had been robbed. Frustrated and feeling a need to do something about it, he joined a neighbourhood watch group and offered to map crimes that were happening in the area. As Greg continued, he came to believe that mapping the locations of crimes would align and empower the efforts of citizens and police to reduce crimes in each neighborhood.
When Doing Everything Right Leads You to Failure
With real motivation and passion, Greg did what all good entrepreneurs are supposed to do—he wrote a business plan and developed a website to report crime statistics (with an underlying revenue model built on advertising). Website in hand, he contacted a friend at the Washington DC police department and together, Greg and his friend convinced the police chief to commit to a trial run. Excited by his success, Greg took the next step and presented to venture capitalists, who were impressed by Greg’s vision and provided seed capital to grow the business. Capital in hand, Greg continued building CrimeReports.com and hired developers and sales people to expand before competitors could catch up. But then something perplexing began to happen. Despite all his efforts, the business didn’t take off. New deals with police departments seemed to hover in a state of limbo, never closing; and despite moments of hope and seeming progress, CrimeReports.com remained stuck in a purgatory that had now lasted for several years without producing any new customers. After investing the first two tranches of venture funding, Greg began to dig deeper and ask himself why. Why, when he had done everything right, had things gone so wrong?
Applying the New Entrepreneurial Process
After he’d spent many years of his life and hundreds of thousands of dollars of investors’ money, it still wasn’t clear if CrimeReports.com was a hobby or a business. When his investors requested that the next tranche of financing be contingent on the company running the Nail It then Scale It process, it created a crisis that drove Greg to stop selling and start listening to the customer and understand what was missing in order to break through the barrier of customer adoption. He created a road show to take his product prototype and business model hypothesis out to the market and really listen—and what he learned shocked him. Greg and his team set up meetings with the full buying panel (all the decision makers in a purchasing decision) at four different police agencies to get feedback on their “prototype” and business model. For police departments, the buying panel meant the police chief, the IT director, the crime analyst, and the police officer. Once Greg had his team and the entire buying panel in the same room, a rich discussion ensued in which a few key insights emerged. First, the founders were on to something—police departments were feeling increasing pressure to share information with the public about crime and to increase transparency and their accountability. Second, the police departments felt that the website was ugly and needed to be improved. Fair enough. Third, although the founders believed that the business model depended on hosting advertisements, police departments absolutely refused to have advertising hosted on the site.
At this point, the founders began to despair, but as they continued to listen (rather than sell), they found out some crucial pieces of information. For one, police officers were actually fascinated by the data possibilities of the website and were truly excitied about the possibility of leveraging the internet to increase the quality of their communication with the citizens of their town. The chiefs of police were interested in sharing data with the citizens and leveraging that data to increase the quality of their policing efforts. Many police chiefs were familiar with how New York City had used the “Comp Stat” model to decrease crime by identifying patterns and targeting “hot spots”; but for most departments, “hot spots” were tracked with a spreadsheet, cork board, and colored pins. If the data was hosted online, police chiefs could use a data “dashboard” to track trends and daily activity. For the first time, police officers could see what had happened on their beat the night before. As it turned out, this was surprisingly difficult for existing departments to do. As one police chief stated, sometimes it took up to six months to see what happened the day before. As the enthusiasm built in each conversation, the CrimeReports founders learned that police would actually pay them to post their data—advertising wasn’t necessary. But they also learned, from the IT directors, that they needed to significantly improve their security protocols in order to allow CrimeReports to host the data. Last, the founders discovered that a touch-and-feel approach was the best approach to selling the new product. At the end of the day, by showing a “prototype” to customers and then listening rather than selling, the CrimeReports team learned crucial facts that had been hidden from view for years.
Greg Whisenant took all the feedback, refined his prototype, and then took it out on the road for another test. The new website was greatly improved in look and feel and had no advertising. And when the Public Engines team took the new version back to the potential customers, the feedback was astonishing. Their customers said things like:
“This blows other choices out of the water.”
“This is a great idea. You guys have really hit on something here.”
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