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From Vision to Product (Part 2)

The first part of this series is available here.

I started working for Getsafe in October as a newcomer to the insurance industry. Needless to say, I had a lot to learn about insurance as a domain as well as about Getsafe. I spent the first month or two on the job trying to gain as much context as possible to formulate some opinions of my own. Here’s a summary of my learnings from these explorations:

The customer lifecycle is super, super long.

The timing of insurance purchases generally correlates with the occurrence of major life events, which means that on average people will only need to buy an insurance product every few years. This presents some pretty interesting challenges for customer engagement as the long timeline between purchases means that we will need to be very creative about how to stay relevant and top-of-mind. We also need to make sure that our products and services can evolve with the lives of our customers.

Insurance was meant to be personalized.

A very interesting aspect of today’s insurance is that it is possible to lose money by selling more product. This is because insurance as a business relies on making sure that the amount of money collected from customers exceeds the amount of money paid out in claims in aggregate over time. The word “aggregate” is key here, because at the moment the industry does not have the means to make sure this equation always holds at an individual level, meaning that companies simply make money on the “low risk” customers and lose money on the “high risk” customers.

Insurance can be a part of every lifestyle.

Many companies supplement revenues from their core business with commission from selling insurances. For example, retail shops often sell insurance for the goods that people buy at the store. Banks often cross-sell homeowners insurance policies when customers apply for a home loan. From the perspective of an insurance company, this means that there is likely an opportunity to vertically integrate and position insurance products as a part of a lifestyle instead of purely as standalone purchases.

See also: Global Trend Map No. 15: Products  

How people buy insurance can become more natural.

At Getsafe, every new employee spends a part of the first week mapping out the customer acquisition journey from initial discovery to completing the first purchase. When I went through this exercise, the customer acquisition journey looked something like this:

  1. Customer realize he needs insurance.
  2. Customer explores options via various tools.
  3. Customer gets quotes from some of these options.
  4. Customer selects one option.
  5. Customer purchases insurance.

What stood out to me here was that the first step of the journey required customers to somehow realize they need insurance. This feels unnatural, because insurances do not occur to me as something that people generally wake up each morning and just decide they need. Insurances do not directly address any fundamental human needs in the way that food fulfills hunger or friends create a feeling of belonging. To me, it feels like the customer acquisition journey ought to have a “step #0” that starts somewhere before the needs of insurances are fully realized by the average consumer.

Insurance has a noble origin.

As I learned more about Getsafe and the insurance industry, I started asking myself a very fundamental question: Why does insurance deserve to exist?

So I started researching the origins of insurance. To my pleasant surprise, insurances have a relatively noble beginning, serving as the instrument by which any given community can empower its members to recover from disasters. Unfortunately, this narrative has gotten lost, because today we generally view insurance companies as sleazy, sales-driven businesses that profit from the fear in individuals. The sense of communal benefit and protection is nowhere to be found in the average person’s perception of why insurance exists. This represents a very large gap between that starting place and where things are today, and I think our mission to reinvent insurance should also include helping people understand how it fits into their lives and why it is good for them and their community.

Turning inspiration into concrete statements

To add up these learnings, here are three statements that start to concretely articulate how the inspiration from above could inform our product vision. Imagine a world where…

  • …Getsafe provides products and services that directly address human needs. There should be a reason for people to wake up in the morning and want to use one of our products or services.
  • …Getsafe engages with people before they realize they need insurance. We want to be a part of the journey to help them understand how insurances may fit into their daily lives.
  • …Insurance feels more like a companion rather than a pile of paperwork. Getsafe should bring insurance back to its roots and re-create a sense of community around it.

With these concrete statements, we can start to tell a story about the world that we would like to create. Here is a high-level pitch for what we are trying to achieve at Getsafe.

Bridging insurance with human needs

“Peace of mind” is a basic human need, and here are some ways that the average person might articulate this fundamental desire:
I need to…

  • …plan for the future.
  • …have a backup plan.
  • …stop worrying.
  • …feel safe.
  • …be ready for the “what-ifs.”
  • …know my family will be OK.

As an insurance company, providing the appropriate coverage to our customers is one way that we can try to address “peace of mind” for them. Unfortunately, insurance is really complicated, and most customers need help understanding what they need, when and why. Traditionally, insurance agents have tried to bridge this gap by setting up long appointments to interview customers about their needs. For us as an insurtech, how can we use technology to do this better? How can we seamlessly bridge “peace of mind” with insurance products such that it feels completely natural to our customers?

See also: How to Speed Up Product Development  

The insurance of tomorrow

Technology has become ubiquitously embedded within the daily lives of people. In today’s on-demand economy, consumers gravitate toward real-time access and instant gratification. This trend provides the optimal environment for next-generation insurance products to incubate because it affords us ample opportunity to inject ourselves into the everyday lives of people. With a mobile-first approach, our app lives inside the pockets of our customers and travels with them wherever they go. As long as we are providing tangible benefits to our customers, we have the opportunity to position insurance as a life companion, rather than a necessary evil. We foresee the evolution of the “insurance experience” in two phases:

1. Insurance as an app

Over the last two decades, technology has dramatically changed how people interact with many products and services. This same movement toward digital and on-demand is now finally gaining traction within the insurance industry. For Getsafe and our insurtech peers, this means that we have the opportunity to define what the “insurance experience” ought to feel like in this new world. As an example, customers can now purchase and cancel insurance policies in real time, without scheduling an appointment or filling out a long contract. We will build technology to transform interactions that have traditionally been complex into one that is frictionless, fast and fair (i.e., claims).

2. Insurance as a lifestyle

Because insurances are complicated and usually irrelevant to daily life, we believe that insurtechs will aim to achieve far more than the digitization of insurance products. We believe that for the industry to truly progress, insurance products must become more ubiquitous in the everyday lives of consumers. It should be clear to our customers how we enable them to live the lives they’ve always wanted to live. They should not perceive insurance products as something that they need to buy but hope never to use.
Getsafe will reinvent insurance by creating an insurance experience that caters to the digital, on-demand needs of customers. We will scale our operations by developing internal tools. Ultimately, we will also create products and services that bridge human needs to insurance products.

Conclusion

If you’ve gotten this far, thank you for reading! I sincerely hope that you’ve found both of these articles useful and that you’ve been able to find some tips to apply to your daily work. Feel free to drop any questions or comments and contact me!

Could an Incumbent Act Like Lemonade?

Lemonade, the industry disruptor touted as a game-changer for the insurance industry, has officially opened, with homeowners and renters products launched in New York.

Lemonade’s opening is significant for a number of reasons. First, Lemonade’s business model will donate unused premiums to a charity. This sounds like a great idea — and it deserves to work — but time will tell if it’s enough to deter fraud.

Second is the Lemonade app.

The Lemonade app seems to be a killer in terms of capability, usability and its use of bots. Get insured in 90 seconds? Tick. Submit a claim and get paid in three minutes? Tick. The app is easy to use and has a slick user interface (UI) – it’s the app every insurer wishes it had.

See also: Lemonade: Insurance Is Changed Forever  

Which brings me to my point: Could a traditional insurer create an app — and accompanying product offer — like Lemonade? Ever?

No. And here’s why.

First, traditional insurers are crippled by legacy systems — creaking green-screen pre-floppy behemoths that no amount of lipstick can overcome. They’re not capable of ever supporting a product offering like Lemonade’s.

Second, traditional insurers have global workforces that are personally invested in the industry status quo. Moving to a product offering like Lemonade would involve ripping up centuries of rules and embracing a lot uncomfortable (and job-threatening) change.

And third, Lemonade’s product offering has no place for intermediaries, who insurers depend on for the majority of their income. As we know, once an insurer goes direct, intermediaries will switch insurance companies, meaning bye-bye revenue.

The only solution for traditional insurers wanting to compete with Lemonade is to start from scratch. In short, they need to create a company or subsidiary unencumbered by legacy systems, workforce constraints and intermediaries.

It’s been done before in other industries. The 1990s saw the advent of the low-cost airline. Traditional carriers, unable to compete with low-cost carriers, created low-cost subsidiaries of their own. These low-cost subsidiaries were not hamstrung by legacy systems, unionized workforces or booking agents. They were free to innovate, create new cultures and products. While some have struggled, many have enjoyed success.

See also: It’s Time for Some Lemonade  

Now is the insurance industry’s low-cost airline moment. Transforming from within is proving to be a glacial and painful process for many traditional insurers. Starting from scratch may just be their best option.

The Time to Adopt Mobile Was Yesterday

Insurance companies across a wide range of offerings (health, auto, home) report they can benefit from investing in their mobile strategy — and yet they are not all prioritizing their digital transformations. According to the 2016 The State of the Mobile Experience report, 89% of insurance decision makers understand the need for a mobile experience and plan to invest in mobile this year. To date, 89% of insurance companies have a mobile website, and 74% have a mobile app. However, 20% of companies with an existing mobile presence rate their existing experience as a six or below on a 10-point scale. It is time insurance decision makers look the issue in the face and get emotionally committed to making some serious (and potentially hard) changes to create new value.

With a rising millennial generation primed to make insurance choices for the first time, providers must have a digital mindset with a high emphasis on mobile. Millennials lack strong loyalty for one provider over another. Though millennial customers are the generation most likely to be disengaged from their primary carrier in general, they are more than twice as likely to purchase insurance policies online. In other words, if you want to capture user engagement from millennial customers, the only strategy that is likely to work is digital.

It’s not just millennials, either. While younger generations may have a clearly expressed desire for mobile solutions, older generations have also become accustomed to these offerings. All insurance customers benefit from the ease and efficiency of a well-designed mobile experience.

The time for your digital transformation is now.

What’s the Deal with Insurance Providers?

As an industry, insurance has been historically slow to adopt mobile technologies — for a wide variety of reasons.

See also: What Millennials Demand as Customers  

For agent and business-to-employee (B2E) scenarios for account management, insurance decision makers list an aversion to change (65%) and a lack of comfort with mobile devices (39%) as major barriers. They also fear losing customer touchpoints (43%) if they enable their workforce to interact through a mobile app.

Insurance providers report that major obstacles with technology (34%), budget (24%) and prioritization (21%) prevent them from providing their policyholders with a strong mobile experience in their B2C scenarios. As the industry evolves and customers expect faster, more tech-friendly customer service and user experiences, industry leaders cannot afford to live in the past.

Though insurance is an age-old industry, companies looking to outpace competitors and find long-term success must offer a strong digital and mobile experience — fast.

Turning Obstacles Into Opportunities (Mobile Solutions)

The best way to offset the industry’s aversion to quick change is to clearly articulate mobile’s unique ability to address common insurance pain points and build a consistent experience across all digital platforms. For all parties involved in the insurance equation — customers (policyholders), employees (insurance providers) and third-party agents and contractors — a well-crafted digital experience that is focused on the user journey is the key.

When asked about their customers, insurance decision makers most commonly note issues of speed and information. 60% say customers lack access to necessary information when they need it, and more than half (55%) feel customers are not receiving assistance in a timely fashion. Adding to these pain points, 30% of insurance influencers feel customers have no way to retrieve the status of a claim or policy, and 26% lack communication from agents.

See also: Maturing Use of Mobile in Insurance  

Employees face similar roadblocks, in terms of accessing information as well as internal and customer interactions. Insurance providers believe their employee’s biggest pain points are working across departments to sell and manage policies (45%), handling too many different policies and claims (42%) and not having access to information in the field (42%). Not being able to register new customers or submit claims from the field (28%) and a lack of communication from policyholders (26%) were other top perceived concerns.

All these problems are easily remedied with the right strategy.

For example, mobile offerings like processing a payment, account management and alerts/notifications make it easier for policyholders to manage and update their existing insurance policy. Likewise, a strong mobile app and website enable customers to access claims and assistance, policy quotes and live chat with customer care departments from anywhere, at any time.

The same can be said for insurance providers. Armed with mobile technologies, agents and claim representatives can expedite their administrative duties and access needed content and information in the field. Mobile solutions also give insurance employees better access to predictive sales and customer demographic information, both of which enable stronger, more targeted insurance outreach. With the right digital solutions providing better communication channels and more value, the touchpoints that insurance firms are concerned about losing can instead become strengthened relationships between agents and policy-holders.

Kicking Mobile Adoption Into High Gear

Mobile apps and websites can make both customers’ and insurance employees’ lives easier. Yet, just because something is good for us, it does not always mean we use it. That seems to be the main struggle for insurance companies today. Insurance providers know that mobile solutions work and that customers want them. In fact, of those companies planning to invest in mobile in 2016, 77% will do so in reaction to customers’ expressed desire for mobile experiences. Similarly, two-thirds (62%) plan to invest in preparation for a mobile-driven future. Yet there’s still resistance to mobile adoption.

To abet concerns and misconceived reservations, insurance companies must engineer their digital and mobile offerings to provide value to their users throughout their journey while maintaining the needed security and compliance restrictions built into their legacy systems.

See also: How to Protect Your Mobile Data  

Luckily, insurance companies can address most employee and user concerns in tandem. By providing agents with greater utility via mobile capabilities, insurance decision makers can, in turn, improve the experience and satisfaction of everyday users. It is time for insurance firms to be active, rather than reactive, about their digital strategies and to stop waiting for customers to tell them when they are dissatisfied.

Instead, put mobile at the top of the list for investment and start taking advantage of all the new opportunities digital can create in the insurance industry.

An Eruption in Disruptive InsurTech?

I attended an InsurTech “boot camp” at the magnificent Christ Church, Spitalfields, U.K., my first such event, and I was intrigued to see what would be presented and how the audience would react.

The organizers billed the day’s theme as “Experience the Eruption.” Their website stated the aim was to “recognize the fast-paced appearance of insurance start-ups, which are creating seismic shifts behind the scenes that will lead to the emergence of a new identity within the insurance sector as we know it today. An ‘eruption,’ which will allow new disruptive entrants to break out into the mainstream and support an industry that needs to engage differently in a highly customer-centric and digital-friendly world.”

Was that lofty ambition that labors excessively on hyperbole, or did the afternoon live up to the hype?

The format of the afternoon was a series of Dragons’ Den (a U.K. TV show) style pitches (without the interrogation) for investment or partnerships from the incubated firms selected for Startupbootcamp’s program (which includes investment from them, meaning there is an element of self-interest that firms do well). The pitches were preceded by a fireside chat from the chief strategy officer of Knip, a Swiss-based app that acts as a portal and broker for insurance policies.

See Also: InsurTech Forces Industry to Rethink

Were any truly disruptive? My view is that they all fell into one of three broad camps of focus:

Distribution and Sales

I’d put four firms in this bracket: MassUp, Spixii, Buzzmove and MyFutureNow — but all had a different focus with different levels of potential disruption.

MassUp was all about making buying insurance for “stuff’ easier by making it an add-on for any purchase. The company had a good story and was slick, but it didn’t feel truly disruptive. Credit card companies have been offering similar protection for years, and MassUp will do well to distinguish itself from extended warranty products that savvier consumers tend to decline. That, perhaps, is the problem with the business model for me — while tech may make it easy for the consumer to purchase the insurance (and for sales companies to add it as an option), it doesn’t obviously increase the value for the customer.

BuzzMove is a successful online removals broker, a portal to help customers find a removal firm when they move houses. The company has added to its capability by recognizing that a key element of quoting for removals is an inventory of the things that need to be moved. Typically, individuals don’t do this when they take out contents insurance (or, indeed, don’t update it when they buy new things), so they run the risk of being under-insured. Linking the life event with an inventory that can be used to underpin an insurance quote is a smart way to add value to the customer — without additional effort. As such, it is effectively looking to take over the customer by owning the life event in the same way banks have looked to do — e.g. take out a mortgage, and they will try to convince you to re-visit your life insurance levels. As such, the concept is not disruptive, but the concept of the home inventory and the tech underlying how this is put together is something insurers (and others) will undoubtedly embrace, so it is therefore significant. I’ll return to this later, as the ownership of this data becomes key.

MyFutureNow has a reasonably simple proposition; it is an online portal for customers to manage disparate pension plans by consolidating them into a single plan that is offered through the site. On the surface, its proposition is attractive and is reinforced by a slick implementation of the website and the app — the economics are being driven by a percentage fee on the value of the pension fund when transferred in. The key to success will be to differentiate the consumer experience. However, as regulated financial advisers will tell you, this is a complex area, and the consolidation of old plans is not necessarily the appropriate outcome for all consumers. It is unclear to me the extent to which MyFutureNow has have thought through the compliance and advice issues. Again, the focus is to try and take over ownership of a particular part of a customer’s portfolio (in this case, pensions).

Spixii’s proposition was timely, what with Facebook’s recent announcement of the addition of “bots” to its Messenger app. Essentially, Spixii offers a message bot that sells insurance (currently just travel insurance, but the concept could obviously be extended quite easily.) Inevitably, all financial service providers will add bots as way of communicating and selling, as will the price comparison websites, so this is definitely an “on-trend” area to watch.

Customer Experience

Three firms fall into this category: RightIndem, Domotz and Quantifyle.

RightIndem looks to enhance claims management by allowing insurers to offer a self-service claims platform and by increasing the transparency of the claims process. Claims is an area consumers point to as frustrating, so any steps to enhance the offering will be hugely positive; it is an area we will see all insurers developing in the coming years.

Domotz is a little more difficult to classify as it is not strictly an insurance proposition. The company plays in the space of the Internet of Things and the smart home. The insurance angle is providing information to the customer that will help reduce claims through smart home management (e.g. the customer gets an alert if running water is detected and nobody is home). Insurers might therefore offer discounts to those who install such systems. As such, it is perhaps similar to the wave some years ago when insurers encouraged drivers to fit alarms and immobilizers in their cars before they were standard issue.

Quantifyle’s proposition is based on driving good customer behavior for wellness by motivating people to achieve fitness goals. Insurers have already played in this area — most noticeably Vitality, whose entire proposition is built around rewarding customers for their lifestyle.

Big Data

The last firm presenting is alone in this category, although others touched upon it.

Fitsense­ demonstrated how it can harness the data collected from wearable tech (such as fitness trackers and smartphones) and overlay that with environmental information to provide the insurer insight into a customer’s lifestyle and behavior. Undoubtedly, there is great insight to be had, but the key element here will be the willingness of consumers to adopt and provide that information to insurers. (Location-aware information was also touched on by Spixii, which speculated that its app could provide, for example, travel insurance options that depend on the travel profile of the individual.)

This leads us into the important area of privacy and ownership of that information, with consumers rightly being concerned about the erosion of their privacy. While the youngest generation of consumers are likely to be increasingly less concerned, the adoption will need to happen slowly to bring customers along. There is also the risk of consumer self-selection (similar to the current adoption of “driving standards” apps by motor insurers), and it raises the moral question of whether increasingly individualized risk pricing is at odds with the original insurance principle of pooling of risks.

So, What Was Missing?

Invariably, InsurTech “innovation” majors on the three areas highlighted above — they are usually the easiest to move elements of the insurance process forward into the digital world but, therefore, are not necessarily disruptive, instead shifting the margin of current offerings. Two areas of development were conspicuous by their absence:

Peer-to-Peer insurance

This is an area where there are a few start-ups dabbling, but they haven’t yet reached any critical mass. Key inhibitors are traditional barriers to entry to the world of insurance, namely regulation and, in particular, capital requirements. It is a fast-moving area and one where, potentially, blockchain technology will grow out of its hype to provide a compelling proposition that satisfies regulators. In particular, recent work suggests that using the Lloyd’s of London model as template and porting to a blockchain model could provide the tipping point.

Consumer-Owned Risk Assessment

While big data has been touted as a way for insurers to get rich, detail on their customers and individualized risk assessment (which, in and of itself is simply a further iteration of the traditional model with more data) leads to issues of privacy and the moral question of individual versus pooling of risk. There is a paradigm shift in the interaction of consumers with institutions in the digital age that isn’t reflected here — that in which the consumer has more power and takes ownership of his or her own data. As such, this could break the mold of the traditional insurance product silos and be truly disruptive. In the new age, the dynamic is reversed, and the richness of data and the assessment of risks an individual faces do not belong to the institution — instead, control is with the individual, who, in turn, get the insight that allows them the power to manage a risk profile.

See Also: A Mental Framework for InsurTech

This shift has started in wealth management, and it seems natural that insurance will follow. New players in this sector will not be the traditional insurer, as the focus will need to be on providing the value to the consumer with the ownership of the data and allowing the consumer to manage it. This sits more easily with the business model of companies such as Google or Facebook than with the incumbents in the insurance market.

Conclusion? 

Nothing I saw in these presentations made me believe this group of companies would be genuinely disruptive (or, indeed made me reach for the checkbook to invest). When compared with the broader FinTech spectrum or tech-centric events, the afternoon felt less slick and less innovative. InsurTech is still young, so there is still a lot of maturing to do, but there were one or two hints from these companies that may stimulate discussion, which, in turn, might lead to genuine innovation.

Dear Founders: Are You Listening?

Since my last post, “Distribution is 80% of your problem,” I have had the opportunity to speak in-depth with several terrific start-up founders about some of the incredible things they are doing and why things are not going so well. Several of their stories remind me of another big lesson I have learned over the years: We entrepreneurs often mistake “listening” as “waiting to talk,” until it’s too late.

A Little Knowledge (About Your Users) Is a Dangerous Thing

All the stories have a similar theme: We launched our product, and we got 10,000-plus users (or 100-plus small paying customers) using unscalable ways. Now, we are not sure of what to do next.

One founder I communicated with had talked to hundreds of her paying users and managed to convince herself that her market was women who want to make sure their kids don’t get too much unsupervised screen time. We talked to the company’s users and discovered that, in fact, the core group that loved the app were working women who want to keep track of their kids and know they are safe after school. Whenever this start-up had spoken to its user, it heard the answer it wanted to hear, not what the users were saying. The lesson learned here was about waiting to tell users what they “should” be doing with the app.

Another app — one that got to 20,000 users quickly with a small amount of seed money — found, once we dug deep, that fewer than 150 of their users were active weekly. The start-up had no idea who these 150 users were or what, specifically, they were doing with the product. After 20 user interviews, we discovered the start-up’s core use case was far from what the company thought it was and that the product was too hard to use. For far too long, the start-up was convinced its technology would change the world, especially because 20,000 users seemed to be using the product.

A third, B2B-focused start-up I recently spent time with has more than 100 paying users but has stalled growth and usage numbers. When I asked the company to tell me who its users were and what pain point it was solving, I kept getting back a laundry list of features and user personas instead. When the company dug deeper and spoke to users, it found that, of the 27 features, users are using two and that no one had discovered the three the company thinks are the real killer benefits. We realized the company’s model needs to shift away from “my users are using the wrong features and should have discovered the ‘right ones.'” As a start-up, you don’t get to tell users what scenarios and which features they should use your product for; consumers will tell you by using whatever they find useful.

Apple May Not Need to Talk to Users, But the Rest of Us Do

As a founder, you start with a hypothesis. You have all these incredible suppositions on how you will change the world with your product. You may think you can get away with: “My users do not know what they are doing. I will tell them what they should do. It works for Apple (or so goes the myth) so it will work for me — let’s just ignore users.” Believe me, those kinds of companies are black swans. For the rest of us, our users matter—who they are, what they use our products for and what they ignore.

This is for two basic reasons:

  1. Product/Market Fit: Unless we know and understand our users (or potential users), our incoming hypothesis of the value our product provides is literally that —a hypothesis. Sure, some people may not get it, and some may just dismiss it. But without a group of people who buy into the value we hypothesize that we can provide and who agree to become ecstatic users of our product, we probably did not have a real hypothesis to begin with, just a supposition that is wrong.
  2. Go-to-market: The more detail we can find out about users, the more we can figure out how to go after them in a tight, focused way. Going after moms who want to limit unsupervised screen time is very different from attracting busy working moms who really want to know where their kids are after school. The two are different products, have different features and have a different go-to-market.

One potential red herring during the early days comes when you manage to attract a chunk of users quickly. You can easily get deluded by the numbers — they’re like inventory, they hide a lot of problems. You convince yourself that what you’re doing can’t be wrong if 20,000 users think you’re right. The fact is that these 20,000 people do not think you are right ;  you somehow managed to “get” them, and they experimented with your product hoping to find something of use. 200 of those users might think you are onto something, but you don’t know who those 200 are. If you understood what those 200 really like about your product, you might be able to find the next 20,000 users who are really right for you.

What to Avoid When You Do Decide to Talk to Users

  1. Don’t defend what you have built and try to convince them you are right;
  2. Don’t keep coming back to your vision and what will come later or focus on product features they should be using;
  3. Don’t make a sales pitch about your company and yourself, make it about them and their real reaction to your product—even if it means you have to throw everything away and start over again.

If you do not do these things, you have not really listened to your users—you have just waited for your turn to talk and convinced yourself you understand your users.

A FRAMEWORK FOR WHEN TO LISTEN TO USERS–AND HOW 

Here’s a framework I have developed over the years about when and how to listen to users:

The First 500 Users

Those first 500 users are the most important people in your journey. You need to do more than just talk to them, you need to build a solid relationship with them — they are the foundation of your product.

In my previous start-up, a career marketplace, I personally introduced my early adopters to friendly hiring managers at many companies and helped them land a job. A lot of those early customers are now my Facebook friends. Some of them even became our ambassadors and had equity in the company.

Those first users add immense value. They  validate your hypothesis, refine your ideas, recruit more users and test new features, on top of a whole lot more. And they are also very forgiving to defects, crashes, bad user experience (UX), everything.

I used to schedule as many phone calls with them as I could. In every conversation, I would first show what we were working on (in detail) and get their feedback. I would then open up  and  ask about what they were doing with the product, why they chose it over others, how they found it added value, what related issues they had that we could help with, among other questions. I logged every conversation.

Listening Is Hard to Do—For Founders in Particular

Most of the time when we think we’re listening, we are actually just waiting for our turn to talk. Here are three reasons why:

  1. We are always busy talking — to ourselves. Even when we are obviously talking to someone else, we are also internally talking to ourselves. So listening genuinely — muting your internal conversation and giving someone your full attention — is hard.
  2. For founders, listening genuinely is harder. Most entrepreneurs have their product, features, ideas and vision so deeply ingrained that, when they talk to users, entrepreneurs are always defending things they find users having problems with . (“But you didn’t see the profile page; the settings let you change this,” “There are so many cool things you can do, didn’t you see this feature?,” “We’ll get to that in Version 3,” “Wait, no, you don’t understand, that’s where the puck is going,” etc.)
  3. It is not easy for people to articulate what they are thinking. To really understand what users are saying, you have to read between the lines. Even if you lead with your world view, you really have to listen to users’ views carefully — both what is said and what is not.

Talking to users requires real effort . Be aware of that and start focusing on your first 500 users. Treat your early adopters with special respect — make them feel special and take care of them beyond just the product.

Beyond the First 500 Users

Moving forward with your customer base requires using other techniques (in addition to real conversations) that are still important. One such tactic is talking through the product,  provoking conversations with product experiments.

An example of this would be radically changing your on-boarding — drop everything and get them in — for a small set of users and seeing what happens. Remove a feature you think is not useful and wait for users to complain. Removing things temporarily is the best way to test if they are really valuable.

It also helps to create ancillary products  ( quick prototypes )  to test value outside your core product. As you learn more about your users, you will start to see more value propositions, some that align with your vision and some that don’t.

Until you are truly convinced you have product-market fit, do not be shy about running small experiments on the side to keep testing different ideas. Use conversations to create hypotheses, and experiment quickly.

Another technique is to always ask, “What else would you want this product to do for you?” in every support email. My start-up once introduced a critical defect in our iPhone app that led to hundreds of support emails. Adding that one question uncovered several hundred feature requests, including a lot we had not thought about.

Talking to users as you scale is more than just about having conversations. Lead with a hypothesis, measure, iterate, run side experiments continuously to test.

Dear founder, do not wait to talk to your users until it’s too late.

And when you do, listen. Don’t just wait to talk.