So today welcome to the, to the monetizing your Mental Capital Pod Coast, [...0.9s] Chris Hondl is here with us today. Chris, thank you so much for joining.The first question I like to ask all of the guests, why would an e commerce seller that's looking to grow, why would a business owner that's looking to grow their business want to hear from someone like you? [...2.9s]You know, I think there's two reasons. One, you know, I've taken businesses that I started myself from just, you know, myself in a co founder at our house.Software business is not ecommerce businesses to some level of success, you know, not, you know, not public companies, but, you know, good solid businesses and in a way that I feel is pretty, [...1.9s] you know, agile and responsive and has all kinds of wonderful properties.And second, you know, I've been doing e commerce and doing software for the e commerce business for a decade now.
We got over 1,000 companies user software on the inventory space, spent a lot of time with a lot of sellers as things have changed.And I think I've Learned something lessons along the way, interesting [...0.9s] and tellless.So you made an anecdotal reference that I thought was fascinating. You mentioned that you were super into the Lean Startup. And what I thought you meant when you said I'm super into the Lean Startup at first was that you've read the book 10 times and you know all of that sort of thing. And what you said surprised me. So tell me, what is your relationship to the Lean Startup? [...1.1s]Yeah I mean, that's a story. So the Lean Startup, the original Lean Startup was a company called IMVU, which is a going concern, [...0.9s] but was started in.I think it was 2004, 2005, seven years before the book with publish, was co founded by five co founders.
The founding CEO was a person my name Will Harvey, who's the co founder of my current company and I've known for about 30 years.And one of their co founders is the guy named Eric Reese who, after leaving I am view, based on the learning there and a lot of other work he did following that authored The Lean Startup. So the in view was the original lean startup.And I was [...0.9s] the second, I think it was the second engineer in the door after the founders.MMM. So you had an opportunity to sit on the front row watching that come to fruition. And not only that, but I'm guessing now you've spent a lot of time using those principles to do the right thing in building what's next, right?Deciding what to build next in a business is, [...1.1s] yeah, hundred percent. I mean, that is, you know um you know, one, yes, a lot of the ideas, you know, we're coming in and we're talking about, you know, how do we take these things? You know, Leanhead existed before [...1.0s] four steps, the epiphany existed before Agital.Velma had existed before these threads, you know, and kind of the sympathist, um you know, Eric then of course, continued and started to write about and speak about and then she wrote a notable book about a couple years after. [âĶ1.1s]
And then so absolutely kind of part of that process. And then afterwards, of course, um you know, as we started finale, you know, following that thread, following that, uh, thread of kind of being humble of, you know, listing the customers of, you know, people talk about minimum vile product.There's a lot of angstrom that word in the business these days, but, you know, really kind of thinking through, okay, what's the product that we can actually sell? How do we get that product in customers hands? How do we improve that product over time? [...1.4s]And, you know, do our best to keep doing that, you know, for now over a decade at my current company, [...3.8s] I think there's 100 different ways that, that we could kind of look at that.But I think applying the lean startup to e commerce is, is a fascinating topic.
And I, and I would be willing to bet there aren't a lot of people out there who have as much experience [...1.0s] in the e commerce space and the lean startup space because they often are not, like, you often don't see individuals applying lean startup principles in e commerce.Yep, because it's a, it's a fairly different, different world. There are a lot of things that apply, however. And so [...0.8s] I'm curious [...1.0s] to go down that road in terms of monetizing mental capital.Yeah, it's interesting, you know, I haven't, it's crazy, you mentioned this and I can't say that I haven't spent a lot of, it's crazy that I haven't put it together, put applying to my own business. Um, [...1.8s] the key, there's so many things that are key, but humility is so much of it, right?Humility about what you know and don't know. Humility about not thinking you go in with all the answers, but letting data [...0.9s] gather the answers, finding ways to spend less of your capital, finding ways to spend less time, less resources, less money, whatever the capital is. [...1.7s]And based on what you know, so you can get smarter later, you know, getting yourself into a learning loop [...0.9s] where you are learning faster than the other folks that you're competing with versus thinking, you know all the answers and usually you execute because you don't intrinsically, you know, the lean [...1.0s] startup is a situation where you kind of have, you know, you don't know what the answers are.
You may not even know what the some of the questions are.And so if you get yourself in that learning loop, you're bound to have more success than if you start with this idea of I know everything now.It's harder in some ways in product based businesses than a software businesses, of course, because in a software business you can write new software, you don't have the lead times, you don't have working capital tied up in inventory. [...1.5s]But that doesn't mean that you can't be thinking about things in terms of learning.And you can't be thinking about things about how do I stay agile? How do I [...1.2s] don't think that I have all the answers. How can I gather data then to gather the answers so that not you're, you know, you're actually using data to then apply to that learning loop.Interesting. I think the learning loop is a is a, is a key part of this. And, and we talked about how, you know, one of the things we invite our guests to do is imagine that they're sitting in that copy shop with an old high school buddy and the old high school buddies doing, you know, 20, 30, 40,$50,000 a month on Amazon.
And they're just, you know, they want to really get better at product launches or reviews or product listings or advertising or preparing for sailing or scaling and exiting that. They really want to get better at this iterative process for what's there.And I think the fascinating thing for me [...1.0s] as I consider that discussion, if I were that Amazon seller sitting in that seat and you were sitting across from me and you had mentioned, yeah, I don't know if I told you, but like Eric Rees like Lean Startup, like I was their second engineer and I think my jaw would have dropped just like it did when you told me earlier, like, holy crap, you're that guy [...1.4s] who's been in the middle of that.And my immediate like, well, what could you teach me that I don't already know about this? Or what discussions, what questions could I ask you that might help me apply that to my Amazon business?So when I consider [...1.0s] the core premise of the Lean Startup, let's start there, yep, as that e comer seller who's in that phase who wants to grow, [...1.3s] answer that straight, that question directly.What is the lean startup and why [...1.0s] is it important to any commerce business? [...1.5s] So [...1.1s] the key part is that phrase held learning loop and it starts with this idea that, you know, is that humility [...1.4s] and start with an hypothesis about what the future is.Whether it's product, whether it's go to market strategy, whether it's expanding into another channel, [...1.5s] whether it's changing your distribution strategy.
Think about then how you can develop a way to with as few resources as possible, test that hypothesis and gather data that's going to confirm a reject, right? So getting humility, you might be wrong, right? And I think that's hard for founders, right?Founders think like, I know the future and experience says you don't just full stop, like maybe Steve Jobs knows the future, but [...0.8s] we're not I'm not Steve Jobs, you're not Steve Jobs, right?And so how can you get a point where you've developed a hypotheses that you can then use data and use and then iteration uses word iteration, what really means is delapai posses, figure out a way to, [...0.9s] you know, use aluminum amount of resources and the amount of resources it kind of scales, right? So it doesn't.If you're a smaller business, it's less resource, if your bigger business, maybe it's more resources.But the important thing is after you've done this loop of, I developed epipacies, I figured out how I can test it, I'm gonna apply resources, you need to make sure you're not out of money at the end of that, right?
So you need to make sure that you can then do that loop again and again, because if you set it up like this, that, what used people used to start UPS is like, I'm gonna make a bet, I'm gonna go raise some money.I'm gonna really hope that I get one shot through that loop before I have to raise my next round of capital upper down, right? And that's pretty risky, whereas if you can find a way where you can take multiple paths through that loop, you're getting smarter faster.And if you're getting smarter faster than the other guy, you're probably gonna win. So describe for me the loop. It is a loop when a customer tries out a new product and likes it, and, and is willing to pay you for it.
What is the, what is the full cycle of the loop? I think they'll lose more about the business owner than the customer.Right, so the business owner or the division manager, but you're the owner, you're the owner of the business in this situation.I'm the owner of a, you know, doing$40,000 a month Amazon business, and I'm trying to figure out how to apply some of these principles, so I don't have so much wasted product yeah so you don't have so much wasted product so what you're probably gonna want to do is develop a couple theories.I use this fancy word hypotheses or guesses. I like to use even a simple word, develop a few guesses because that's what they are guesses about how I could reuse wasted product, right?So maybe there's a different process in my warehouse, maybe I can shorten my lead times with my suppliers, maybe I can have better forecasting, [...0.8s] maybe it can play with pricing so that I, you know, make sure that I don't have a working catapult tied up in product that's not moving, maybe 4 to guesses.And the thing about which of these guesses are most likely and think both in terms of, well, which are the ones that I can, I think are likely based in first count principles, but also which are the ones that I can, [...0.9s] you know, develop a plan to test where I can basically say, oh, that's true.
Like oh, I need to play with my pricing.Okay, what's the, what is the shortest path so rather than Newton, I'm gonna spend a year playing with price, and you get an answer how can I find something that I have some evidence, one way to rather not that guess, because that's what it is.Yeah, it's true or not and do that quickly, right. And so, you know, again, the learning loop is about you and about not knowing the future, and in saying, you know, I use this for hyposis, let's use word guess, and how can I make, make more of those? How can I do more of those in less time and do more of those with fewer resources? So I'm curious.You mentioned doing more of those with fewer resources, and you also mentioned [...1.3s] working capital. If anybody is concerned about working capital on this podcast, who's listening to this, [...0.8s] definitely gonna listen to the last episode with Josh Hadley. They're a ginormous Amazon seller.And they showed me or walked me through a process where they're using [...0.9s] 90 day balance credit cards as well as some different [...1.5s] like, [...0.9s] like payment terms across different pieces, plus payment terms from their manufacturer to the point where they were getting six months of lead time before they had to pay.So, like, they would place the invoice and they didn't actually have to pay the invoice interest free for 6 months.Nice. And you were talking about, like, how do I without tying up [...1.4s] my working capital, yep, how do I create a situation where I'm, I'm finishing that loop more quickly and doing it with less resources?And so highly recommend people go back and listen to that episode.
Because that Harkins back to this classic [...0.8s] Dell Business School case study from a couple decades ago.Dell getting to the point where they basically received the money from the consumer before they had to pay for the parts for the computer from their customers, [...0.8s] and, you know, getting that marvelous world where suddenly you've got, like, your, you know, your head you're negative, right? Yeah, [...1.0s] this is a class.Exactly, that's exactly what he had done in so many ways because he was able to [...1.2s] iterate and extend where, you know, where his capital went just by increasing that.So he was able to, you know, but he was getting feedback loop from that first batch on month two and he still had four months to perfect the product before he had to pay for the first batch that he bought.Yeah. And, you know, thinking time back into a learning loop, right? So learning loop may not be tied into the necessary specifically. Like the working capital is one of resources you have, other resources you've got, management attention [...0.9s] you might have, [...1.2s] you know, I don't know, I, you know, whatever staff time or what, what not, [...0.9s] you know, if you're not in that situation of having that, you know, that virtuous cycle and, you know, negative, you know, negative cash cycle, [...1.1s] then you're saying, okay, well, how can I get there? And that's where you get in those guesses, right?So, it's like, you don't have to get there tomorrow if you're thinking like, oh my gosh, it's, I'm going to revent my entire business to make this happen.
It's like, well, okay, but what are this steps?What's that first, and maybe what can I do? And if there's three or four things I'm going to try to move me closer to that, let's go try them and let's do it, and let's try to do that as quickly as possible. And then let's gather the data and have the systems in place to gather the data to figure out whether it worked or not.So could I get that credit card? Could I, you know, I gotta watch podcast, you know, to see yeah, no, what are the different elements of the story? Can I do this? Can I do that? How can I try these different things and which of these things can I try more cheaply with less of my time and less of my attention?Another way, another way that I've heard this described as a bullet versus a cannonball 100%. So like, are you firing a bullet or are you firing a cannonball, right?Like, is this a, is this a quarterly long sort of thing or is this something you can execute in a week, you know, maybe less and understand something about what's going on? I'm not saying every bullets only a week and every cannonballs, yeah, quarter. But that idea of like, am I gonna fire a bullet or a cannonball at that target?
I think is a [...1.0s] terribly powerful thing to consider in terms of like what to do next. Yeah, but don't think that you're like a sniper that's gonna spend, you know, six months lining up that bullet.That's the only thing I'm gonna say about. The analogy is, you know, think about a guy that's got a lot of bullets and they're really cheap, and if they're not, you're gonna find a way to make those bullets cheaper.Yes, because you want to fire a lot of billets and hope one hits, right? It's not about thinking really hard like that. If you're thinking really hard before you do something, you're probably not doing it, right. That's probably a cannonball.Yes, that is, that's the cannonball. Um, and, you know, they're part of the two, you know, this idea you know, you gotta you know you're gonna fail, right like if you're not having some misses, you're not doing it, right, right.If you're not making bets, then you're just, I don't know what you're doing, but you're certainly not, you're not making bets like a bet, like if you're at the casino and you're making bets, some of those are not gonna work out.And similarly here, if you're having guesses, if they all work out, you're not really, you're either not really making guesses and really trying to push it on envelope, or you're not being true to yourself in terms of like recognizing when you were wrong. And again, that's a humility, like right on [...0.8s] right, it's okay.
That's like, that's part of the game.That's part of the deal, right? That you're not going to be right all the time. So one of the challenges I've found is I've tried to implement the lean startup across my different companies. It has been [...1.4s] the data gathering portion is a pain in the butt.Yeah, like I just there's some part of me that's like allergic to those [...0.8s] like survey part of gathering, like, like, and it's funny, like the, even the customer feedback portion of just like customer interviews, like there's parts of that that are just so painful.And so I think that's a big reason why a lot of entrepreneurs skip the data driven approach is because they just don't quite see the value in the data. [...1.1s]Yeah, you know, it's there we've got a straight places in on the software industry, you know, famous stories of people doing AB tests on two shades of blue, right?You know, coming out of when this data approach is really hot and we've been, I fell in that trap myself and my current company, you know, we were doing a B split tests on pages where, you know, you couldn't reasonably at our traffic volumes, you know, I'm gonna be, to be, [...2.1s] you know, get kind of the information and signal out that you want.
And so I think it's important to think about data not in terms of what's relevant for someone else at some other stage, but what's relevant for you at your stage. Right?And so the kind of data you're going to get if you're doing an AB split test on, you know, Amazon's homepage is mean different than the kind of data you get a small business owner. But that doesn't mean you don't get data. That doesn't mean you don't [...1.2s] evaluate.Okay, what can I learn here? Whether it's a qualitative interviews, whether it's, hey, my sales went up, whether it's I was rejected for that credit card or not, you know, it doesn't mean that you don't take [...1.4s] a piece of data. You know, there's sometimes there's cargo culting that goes on.If you know that expression in the world of Lean Startup, they think, oh, this other company did these things, I'll do those things. And therefore I will then be doing Lean Startup as opposed to saying like, you know, are you doing, you have an iterative loop.
Am I collecting data that's relevant?Are you doing hypotheses that you can test with amount of resources that are kind of small relative to your scope of control or the size of your business? [...1.5s]You know, there's a you know, you card called into a bunch of things that are provided for a bigger company versus things that you can actually apply in your current business.So how did the other thing I would say about the data side, oh, I love that. I, I think. Have you, have you come across any hacks that have made the data gathering part less painful? [...8.5s]Gosh, I don't have a great I don't have a great answer if that one, I don't, you know, I don't feel like I've got a like, yeah, sorry, I don't have a ready answer that, like I've got a hack here. [...1.3s]The biggest thing is, [...0.9s] you know, I'd say it's a first principle's approach. It's okay. Why am I gathering the data? What am I actually trying to answer how much data I need to actually give me [...0.9s] make a reasoned decision as to whether the hyposis was true or not, right?Not trying to be perfect, right? Not trying to have, you know, [...0.9s] was it you know the, was it in Lord of the Ring, Saraman has the ball and he can see the world, right? I think the palent here, right?That's the, that's that company palent here came from that. Like you don't necessarily need that. Like maybe some other personaels needs that, you know, what's the data? What's good enough data, what's good enough, good that is appropriate for your situation?Again, the cargo culting, that's one of the things I think that's been a little bit [...0.9s] in my world of software, there's a lot of cargo culting that goes on around continuous deployment and, you know, servers and how you do testing. And that's not really appropriate for this audience.But, you know, a lot of stuff kind of went, I feel really going to stray because people are like, oh, that's how somebody else did it.That's how I should do it. As opposed to asking the question of what's appropriate for my business, my situation, my scale of operations. Interesting. Yeah, like how do I, how do I make that more appropriate by [...1.1s] identifying how it fits into my business and connecting those different thoughts.Yeah, yeah. The key thing I think though, again, is there's a data piece, but not forgetting about the rife, you know, the bullet or reducing them out of resources and kind of recognizing [...1.5s] that you're not a failable.
Recognize you don't have all the answers.Putting yourself with a position of a little bit of humility about like what you do and don't know and going ahead and saying, you know, hey, I'm gonna go to try to find out the things that I don't know that aren't pointing me [...2.1s] interesting.So there's something to be said of like leaning into the weaknesses and seeing like how you can take a step back from it.One thing I would say is don't let your identity become wrapped up in the product. There's no faster way than to lie to yourself about how the product's doing. Then if it fails, I fail. Like if you're, if you say that about your business, if this fails, I fail. [...1.3s] You may need.There's some therapy options that are amazing and you need to disentangle because that leads to that humility that you're describing there, Chris, in terms of like the lack thereof.Yeah. And in my world, I've seen a lot of, you know, I'm in the software space. I've seen a lot of software companies that come in where often it'll be founding teams that come out of e commerce, [...1.7s] you know, and or in other software I've had.And so they think they come and they think they know all the answers and the answers they knew all the answers for their business, they don't know all the answers for the industry as a whole and for all the businesses. And it leaves blind spots.You know, I think you know I think it's a weakness for, you know, not having ever run, I haven't run in the commerce shop myself.But in some ways, it's a strength [...1.0s] because, you know, I can come into the space, no bias, say, hey, tell me what, explain to me what your problems are now. Don't tell me what your solutions are, and we'll work together. Finger solutions.Tell me what your problems are, what your pain points, and we can work together to figure out, like, okay, how we're gonna solve this stuff? Fascinating.So if you were to consider, so I just want to bring up these different points. If you were to consider product launches, reviews, product listings, advertising, preparing for scaling or selling and exiting those, those different categories.
And I'm gonna throw it in the zoom chat here just to make it easy for you to look at them.If you were to consider each of these different categories, which two would you say are the most important to implement something like the Lean Startup? [...7.6s]Well, you know, my default answer is going to be [...1.5s] which are the ones that are going to be, [...1.0s] you know, driver business right? Which are the ones that are there's risks which are the ones where [...0.8s] you think you're going to drive your business, so it's a little hard to answer off the cuff.My guess is preparing for scaling and selling and exiting are probably not applicable, so I'll set those aside. Preparing for scaling is almost by definition, [...1.4s] like, you know, kind of when I think of that, it's like, oh, I'm gonna be 10 times, I'm bigger than I am now or 20 times bigger than now.You know, you're right for that today. And, yeah, tenx is better than 2 x yeah tenx is better than 2 x but on the other hand, it's like, you know that will that will come right there are success disasters where you, you know, on the capital side, but, like, [...0.9s] you know, you can you can kill yourself preparing for something and then never, never get there, right.Similarly, selling in exiting that's gonna come from having the successful business, [...1.3s] you don't think you lean, you lean start up yourself there. [...1.3s]
You know, if I to make, if I was gonna go, I would probably guess, I would probably say I'm not good.I would probably say launches and listings, you know, those are the ones where there's probably you, probably you may very well have the most ego, you know, just have to remind yourself most frequently to be have a little humility. You may have the most ego tied up and to like knowing what your products are.You know, I think about our folks I work with in commerce and [...1.2s] as they get bigger, the way they get bigger is they get typically as they've got a pretty good head for product, they got some product that the world needs and for whatever reason they figured that out and they figured out how to reach that market.And then they get to a certain scale, like we've been talking about [...0.9s] 40, 50,000 a month and it's like, oh, my head's gonna explode with all the back office operation stuff. [âĶ1.4s]
But, you know, my guess is if people, a lot of people are gonna have, they're gonna be really have their egos, we said tied up. They're gonna have a lot of thought around, like, the product that, where it's listening, but how we're gonna launch it.And that's where one we're having a little humility and being like, hey, I might not have all the answers. We probably use the most support. And so you think, like, let me apply some of these principles in that space.I love it. And [...1.0s] if you were going to design an experiment where you're testing a hypothesis, and let's imagine that you're designing an experiment around a product listing, [...0.9s] and you are actually selling fidgets, so like fidget toys, the, the, you know, different, you know, spinners or different things like that. [...2.1s]The challenge that you're facing right now is that sales have just completely plateaued. You. You appear to be capturing as much of the market as possible, [...1.3s] but you're also not the only thing on that product listing page. From a standpoint of, like, the search results, you are the, the No.1 slot.
I'm curious as you, if you consider that scenario that I just pulled out of the air, okay, how would you design [...1.5s] a true lean startup hypothesis test to help you identify, [...1.4s] you know, what to do next? [...7.7s]Well, let me go first principles here on. You said leading in, I'm not a, I haven't operated an Amazon store myself, but I'm gonna start with, okay, [...0.9s] do I need to get more listings that are alternative products that show up in the same space?I am where I can leverage some synergy across the different products. [...1.1s] What question did you ask yourself to start coming up with these ideas? [...2.7s]I ask myself like, okay, so I've got a listed and, you know, I'm thinking about it from just being in, you know, my business and I'm thinking, okay, well, how much, how, much you know how much space do I actually have in the user's mind?
Can I get more space in the user's mind for alternatives, for other ways of looking the problem? [...1.3s]You know, look at my business, you know, sometimes do you start asking yourself why it's not happening? Like why are my sales plateaued? What, what, what if I waved a magic wand? Could you know what things would change that would make the sales not plateau? Like how do you start?I think that was the knowledge like there's humans out there right so there's humans out there and, you know, I'm reaching as many as I'm reaching with the current way. And he said, we're already No. 1, so I'm not going to get farther up.So presumably I need to either, you know, find other things that are gonna, you know, kind of show up so I can get more spots or I need to the next thing is going to is like are there. And I want to make sure that there's some synergy, right?So there's some, you know, some building up some brand or some, you know, some, some synergies in terms of like how they appear and then also be, I want to be looking at like, are there adjacent CES? Right? And this is all business school, business standard, business tank.
These are some adjacent seas that I can reach that or maybe other search terms or other categories or maybe with the same physical good, I can position in a different way.So now it's a variation of that. Maybe same physical product with different, you know, different marketing around it or maybe the same physical product, different packaging.I don't know. Packaging is hard to change and that's right on hypothesis. So let's say that the variation is the hypothesis you're writing.Yeah, I think the trap that most business owners fall into is they're like, that must be the answer. And they just dive in [...0.8s] and, and then they, you know, that's what they're hoping to confirm their own bias that that was the answer.And then they come back on the, look, sales went up by 5%, so that's definitely the answer, right? Like, but they didn't allow it to be a true test. How do you make sure that it's a true test as you're designing the experiment?Well, I think, you know, if sales went up 5% and I spent a small, like if I spent a nickel and sales went up 5%, I mean, man, that's cheaper than advertising, right? So, so let's start with, okay, how can I pull the resources down, the resources for that test down to get that signal?And that would make a bullet versus cannonball. So find what's the least amount of effort I could, I could take to achieve a signal that tells me I'm in the right I'm going in the right direction I'm going in the right direction and then being open to that signal, right?So like [...1.2s] looking for the signal looking for the signal going in knowing I'm looking for a signal not from me but from my customers, I think is a paint hourful way to consider that I like that.
Yeah, and then you're, you have to Opie be listening, you know, listening [...1.0s] out there and then compress time, right? So, you know, again, there's a lot of resources workingables one, there's other one, like how much management bandwidth you have and just time, right?Because eventually you love your business now, but at some point, I mean, depending on whether supporting your lifestyle and the way you want to support it, [...0.9s] even if it is, you may get sick of it, right? So you want to get more of this to happen faster, right? So time is absolutely a resource.Chris, I think we could talk for hours and hours about the Lean Startup and about all of these different pieces. You've definitely handed us some very good food for thought in terms of how to apply some of this, where to go into some of those different pieces and what that all looked like.I really appreciate your time. I'm curious, any anecdotal story that you [...0.8s] would want to share with the audience around your time working inside [...2.0s] these different startups and or [...1.1s] just in your journey being in the Bay Area for as long as you have been, oh my gosh, there are, you know, I'm [...0.9s] not a young man.There are a lot of stories. Some are pretty crazy, some are pretty [...1.4s] pretty normal. [...4.2s]You know, one, one lean story, you know, one one word, those one short two shore stories. So one kind of specifically brown lean. You know, we were you may have heard the phrase continuous deployment if you're in attached to the software world.Yep. [...1.2s] It was funny. So the guy who coined that phrase actually worked for me.
He went to a meet up in Palo Alto and we were having debate with the other engineers, myself [...0.8s] about should be continuous point where continuous ship. I was always partially continuous ship, but he said continues to deployment.And I think you can trace back, that's how you get CICD, the CD part of that, and I love it. There was a meet up in Palo Alta circa. It would have been, man, 2000, 2007, 2008 time frame. That's so cool. They were sitting around like, what are we gonna do? And Timothy Fitz was the guy's name.And second story was actually a little bit of a, you know, our founding story, right? So I said, you know, we didn't come out of e commerce. We actually started out [...1.3s] selling.
How do you get to running an e commerce company that does back off a software? You start out creating a video game [...0.8s] with a fireworks theme where you try to get people to create videos on a fireworks theme that they share.Because we knew a consumer entertainment [...1.0s] that very quickly, but this is listening, right? So we brought it.Wait a second, wait a second, you were gonna make a video game where I make a fireworks display, basically the makeup fireworks display and you basically set it to music and share it with your friends. [...1.2s]Car maybe not a great idea, but again, this was 2,009 and social media was different for those of you that are, yeah, I don't know what you're doing in 2009. It was 15 years ago now 16 years ago, now you may not real call what social media was like back then.It was two days, I do very different, but it was the wrong idea. But you know what? It didn't matter because we got together on June 1st was I think the first day we started our company. We brought it on.I think it was the first, second week of August.
We were in Mason City, Iowa at an event called the Pyrotechness Guild International, which is a fabs event. You should really check it out if you like fireworks. Um, and we put it in. There were 2,000 people, they just love fireworks.The point they're gonna spend a week in like middle of Iowa to watch fireworks and they're like, it's the thumbest thing ever, [...0.8s] oh my gosh. But, but what we really want is some software that could actually design real fireworks shows. [...2.0s]Oh, and so they said, can you hook it up to a can you hook it up to this firing system there's another Bender on the other side of the trade show.The trade show floor was the cowbarn just so clear, it's a county fairgrounds and that's where the trade show runs. And they swept it out, of course, beforehand.And so we talked to the folks across the way and the other folks across the way. And we showed up on Monday and by Wednesday, this is a used word pivot.
And we were software to design fireworks shows [...1.6s] and that we then integrated with hardware, brought that in the market.And then again, listening our customers followed it up [...0.8s] after a while. The liking of the fireworks show things interesting, but designing it shows another business.We really are importers. We bring the fires in from China, we import them, we warehouse them and then we have to set them up and we have to track the inventory, otherwise we're gonna go to jail. [...1.1s] You need to do inventory software for us. And it turns out that your value proposition is don't go to jail.People buy your software [...2.4s] when the pain you solve is don't go to jail, they buy your software. They buy your software no, it's a it's a pretty good it's a pretty good value proposition I think that takes the cake right there in terms of like like discovering a pain and following it all the way down.And I love that you took that, you know, your idea for this social media driven fireworks show thing and you went to like 2,000 people who should have been like the most excited in the world around this social media thing. And I'm sure there was probably a few people who were excited about it.I thought it was cool. And let's talk about data because data is appropriate.
So we were two folks, right? And we had a benchmark, we wanted to sell 40 licenses.So we went in with hypothesis, we went in with a goal to sell, take money, to change for a good [...0.9s] with the handicap of no one knew who we were and we wanted your money today, but we weren't going to give you any software until October [...0.9s] with three months later, however, we are only asking for 40 bucks.So, you know, like what's 40 bucks right even 15 years ago, 40 bucks wasn't that much money.Yeah, but that's an example for the data point like, you know, okay, it's not this big complicated thing. It was like, all right, let's go. Am I willing to risk my 40 bucks on the idea that this could be kind of cool?Oh, and I'll give you money back guarantee, but who are you?
And well, I don't really know if I'll ever see you again. So do I risk the 40 bucks and you were getting no, no, no, no, no.Well we started we had some of us is we actually did get, we got nose, but then it's like once we said, hey, we'll integrate with the firing systems, we got more yeses, right?And then we crossed our threshold of the number of people that said, okay, this is what we want to know, is that a positive result? And we did get, by the end of it, by Wednesday, we had enough people to say, yes, that it was a positive result on that hypothesis.Well, the fascinating thing is [...1.0s] you actually didn't get a positive result, you got a negative result and pivoted mid swing.Yep, that's right. Like, like it was straight up, this is not working. And so, so you're loop, you're talking about that loop, the loop, you complete the loop and Monday, oh shit, this is Rob [...1.3s] show up and people are like, this really isn't what we're looking for.
Tuesday, talk to new partners and think, oh, maybe this could work.Tuesday night at the hotel room at a menu item that actually downloads the data to this new system. Wednesday, show up and be like, hey, Nanao supports Oda Cue Fire and Advanced Technologies Fire.I forget the name of the other company. [...1.4s] I got the pictures to prove it. We've got photos in our company history book of this event and you can actually see the transition.I flipping love that. I think it's fascinating to hear you describe that test and the pivot, and then you describe future pivots that are as well. But you went in with an end in mind, okay, in order for us to consider this a positive signal, how many of these do we need to sell?And I think that if you go in with that sort of a hypothesis, that was the hunch, yeah, [...1.0s] you either wail or you won't. And you did because you pivoted on the negative result that you got on Monday, yep, into building an integration.
But those were some sleepless nights.Yeah, I mean, and the thing is is we started, the first time we started the company was on June, so that's, you know, we're nine weeks in right.So again, when you start a company, are you in front of customers gathering data in nine weeks? And if not, [...1.5s] okay, and what, how could you get there? And if not nine weeks, can you get it to four?You like, how do you get there? And you're asking for my this, the other thing, and it's soft for people because, you know, if you're selling somebody physical goods, you kind of need to get money in return.But, [...0.8s] you know, there's a great image Steve Blank, who wrote 4 steps the epiphany before this, [...0.9s] a great image of, you know, asking people with their they think they would buy your product cause, yeah, [...0.8s] of course your mom's gonna mind it. Everyone's gonna say they want to buy your product.Yeah, everyone's gonna do a pilot, right?
I've received a pilot but a non paid pilot, but like, [...1.0s] the real test is a paid pilot say no as well. It's actually even better. It's you go in there and you say, you know, hey, I, you know we don't have it ready yet.And the, the buyer won't let you leave the room because they desperately need the software so bad that they want to. They are like pushing money on you to make sure that you will actually build what they need, right.So they leap across the table and grab you and say, you will not leave until I can have a chance to give you some money because [...1.0s] I want this so bad.1. See, that's what's fascinating is if you find a need that's great enough, I e, you go to jail if you don't buy this software. They are jumping across the table, right, like, please, please build me this piece of, please take my money.And I think that's fascinating when you consider that, because really money is just a, [...0.8s] a currency of energy, right, an effort, a measure of effort and so am I willing to give up some of my hard earned effort money in exchange for my future effort?Heck, yes, if I don't go to jail, that's right. So [...1.1s] I think what you've described there is, is a fascinating example, and I think the same could be true in [...0.8s] the, the sellers that we're talking about.
If they've developed any sort of audience they've got.They've captured 500 Emil addresses, send out an email to that to everybody, and say here's the product, and guess what?You can purchase it for 50% off right now, starting to ship in three months, right, like, that's 100% a test, hundred percent a test and if they won't and hundred percent refund guarantee you. If you change your mind between now and then, like, like, you can.We're at a point where the, the level of trust in the internet has increased to the point where we're more warm, we're more willing to put our credit cards into random websites. For a long time, I used to tell my grandma, do not put your credit card in anywhere except Amazon.
And I had to tell her that she actually passed away this last year. I'm getting to the point now where I would have had to start telling her, okay, it's probably okay to put your credit card in some other websites, but do me a favor and send me the link before you do.Yeah, because I just the last thing I want is you to get a drink, but, but we're at a point now where that's become more common, and people have taken more of those risks, and it's out there, so you can ask, and you, you will get [...1.2s] a signal from the buyers.Yeah, you can, and if you can build an audience, right, that's one of the things that you, you know, you said there, right is you can, you know, we talk a lot about marketplace sellers, but if you can find a way to, to build that audience to get that direct connection, you know, there's this whole nother topic about repeat sales, and oh, yeah, how do you build brand, and how do you, you know, people talk about FBA fees, but, you know, if an Amazon fees but if that really is a way that you get the first sale, but you're gonna get more sales in the future that are maybe not, you know, that higher margin, you know, there's a lot.You can get in trouble that way, of course, as well, oh, yeah, it's 100%, but the, [...0.9s] but, yeah, so there's there's two stories, right?So there's one, [...1.7s] you know, a little bit of a lean startup story in the early days, you know, kind of coinage of a term a million other lean startup stories and a little bit of a, you know, an application for, you know, two folks working out their house going to the middle of [...1.1s] actually was on the edge of Iowa and actually the middle's Mason City.
It's not quite on the middle of Iowa, but going to Iowa, you know, a thousand miles away to test their hypotheses where the data was, did 40 people want to spend 40 bucks? [...1.1s]I love it, I love it. Chris I appreciate you how can our listeners reach out? How can they find out more about your inventory management software? Yeah, I love to talk about, you know, of course, our business. They can reach out to me.It probably best find me on LinkedIn these days. LinkedIn is great. I'm sure that there will be my name and stuff to be in the contigue information. Also, my company is Finale Inventory. We do software for inventory management, multi channel sellers.There's a million different on ramps, whether you're doing barcoding or warehouse management or FBA and trying to forecast FBA or multi channel selling a million different on ramps to kind of solutions to the problems. So Finale Inventory.Com is my company. I love it. And I can tell you based on some experience my colleagues Scott Sharp and Sierra Rey have had with the finale team that [...0.8s] they take good care of people.So appreciate you on the show today, and we'll wrap it up for this episode of Monetizing Your Mental Capital, [...1.1s] hundred percent. Thanks, everybody. [...23.8s]
We got over 1,000 companies user software on the inventory space, spent a lot of time with a lot of sellers as things have changed.And I think I've Learned something lessons along the way, interesting [...0.9s] and tellless.So you made an anecdotal reference that I thought was fascinating. You mentioned that you were super into the Lean Startup. And what I thought you meant when you said I'm super into the Lean Startup at first was that you've read the book 10 times and you know all of that sort of thing. And what you said surprised me. So tell me, what is your relationship to the Lean Startup? [...1.1s]Yeah I mean, that's a story. So the Lean Startup, the original Lean Startup was a company called IMVU, which is a going concern, [...0.9s] but was started in.I think it was 2004, 2005, seven years before the book with publish, was co founded by five co founders.
The founding CEO was a person my name Will Harvey, who's the co founder of my current company and I've known for about 30 years.And one of their co founders is the guy named Eric Reese who, after leaving I am view, based on the learning there and a lot of other work he did following that authored The Lean Startup. So the in view was the original lean startup.And I was [...0.9s] the second, I think it was the second engineer in the door after the founders.MMM. So you had an opportunity to sit on the front row watching that come to fruition. And not only that, but I'm guessing now you've spent a lot of time using those principles to do the right thing in building what's next, right?Deciding what to build next in a business is, [...1.1s] yeah, hundred percent. I mean, that is, you know um you know, one, yes, a lot of the ideas, you know, we're coming in and we're talking about, you know, how do we take these things? You know, Leanhead existed before [...1.0s] four steps, the epiphany existed before Agital.Velma had existed before these threads, you know, and kind of the sympathist, um you know, Eric then of course, continued and started to write about and speak about and then she wrote a notable book about a couple years after. [âĶ1.1s]
And then so absolutely kind of part of that process. And then afterwards, of course, um you know, as we started finale, you know, following that thread, following that, uh, thread of kind of being humble of, you know, listing the customers of, you know, people talk about minimum vile product.There's a lot of angstrom that word in the business these days, but, you know, really kind of thinking through, okay, what's the product that we can actually sell? How do we get that product in customers hands? How do we improve that product over time? [...1.4s]And, you know, do our best to keep doing that, you know, for now over a decade at my current company, [...3.8s] I think there's 100 different ways that, that we could kind of look at that.But I think applying the lean startup to e commerce is, is a fascinating topic.
And I, and I would be willing to bet there aren't a lot of people out there who have as much experience [...1.0s] in the e commerce space and the lean startup space because they often are not, like, you often don't see individuals applying lean startup principles in e commerce.Yep, because it's a, it's a fairly different, different world. There are a lot of things that apply, however. And so [...0.8s] I'm curious [...1.0s] to go down that road in terms of monetizing mental capital.Yeah, it's interesting, you know, I haven't, it's crazy, you mentioned this and I can't say that I haven't spent a lot of, it's crazy that I haven't put it together, put applying to my own business. Um, [...1.8s] the key, there's so many things that are key, but humility is so much of it, right?Humility about what you know and don't know. Humility about not thinking you go in with all the answers, but letting data [...0.9s] gather the answers, finding ways to spend less of your capital, finding ways to spend less time, less resources, less money, whatever the capital is. [...1.7s]And based on what you know, so you can get smarter later, you know, getting yourself into a learning loop [...0.9s] where you are learning faster than the other folks that you're competing with versus thinking, you know all the answers and usually you execute because you don't intrinsically, you know, the lean [...1.0s] startup is a situation where you kind of have, you know, you don't know what the answers are.
You may not even know what the some of the questions are.And so if you get yourself in that learning loop, you're bound to have more success than if you start with this idea of I know everything now.It's harder in some ways in product based businesses than a software businesses, of course, because in a software business you can write new software, you don't have the lead times, you don't have working capital tied up in inventory. [...1.5s]But that doesn't mean that you can't be thinking about things in terms of learning.And you can't be thinking about things about how do I stay agile? How do I [...1.2s] don't think that I have all the answers. How can I gather data then to gather the answers so that not you're, you know, you're actually using data to then apply to that learning loop.Interesting. I think the learning loop is a is a, is a key part of this. And, and we talked about how, you know, one of the things we invite our guests to do is imagine that they're sitting in that copy shop with an old high school buddy and the old high school buddies doing, you know, 20, 30, 40,$50,000 a month on Amazon.
And they're just, you know, they want to really get better at product launches or reviews or product listings or advertising or preparing for sailing or scaling and exiting that. They really want to get better at this iterative process for what's there.And I think the fascinating thing for me [...1.0s] as I consider that discussion, if I were that Amazon seller sitting in that seat and you were sitting across from me and you had mentioned, yeah, I don't know if I told you, but like Eric Rees like Lean Startup, like I was their second engineer and I think my jaw would have dropped just like it did when you told me earlier, like, holy crap, you're that guy [...1.4s] who's been in the middle of that.And my immediate like, well, what could you teach me that I don't already know about this? Or what discussions, what questions could I ask you that might help me apply that to my Amazon business?So when I consider [...1.0s] the core premise of the Lean Startup, let's start there, yep, as that e comer seller who's in that phase who wants to grow, [...1.3s] answer that straight, that question directly.What is the lean startup and why [...1.0s] is it important to any commerce business? [...1.5s] So [...1.1s] the key part is that phrase held learning loop and it starts with this idea that, you know, is that humility [...1.4s] and start with an hypothesis about what the future is.Whether it's product, whether it's go to market strategy, whether it's expanding into another channel, [...1.5s] whether it's changing your distribution strategy.
Think about then how you can develop a way to with as few resources as possible, test that hypothesis and gather data that's going to confirm a reject, right? So getting humility, you might be wrong, right? And I think that's hard for founders, right?Founders think like, I know the future and experience says you don't just full stop, like maybe Steve Jobs knows the future, but [...0.8s] we're not I'm not Steve Jobs, you're not Steve Jobs, right?And so how can you get a point where you've developed a hypotheses that you can then use data and use and then iteration uses word iteration, what really means is delapai posses, figure out a way to, [...0.9s] you know, use aluminum amount of resources and the amount of resources it kind of scales, right? So it doesn't.If you're a smaller business, it's less resource, if your bigger business, maybe it's more resources.But the important thing is after you've done this loop of, I developed epipacies, I figured out how I can test it, I'm gonna apply resources, you need to make sure you're not out of money at the end of that, right?
So you need to make sure that you can then do that loop again and again, because if you set it up like this, that, what used people used to start UPS is like, I'm gonna make a bet, I'm gonna go raise some money.I'm gonna really hope that I get one shot through that loop before I have to raise my next round of capital upper down, right? And that's pretty risky, whereas if you can find a way where you can take multiple paths through that loop, you're getting smarter faster.And if you're getting smarter faster than the other guy, you're probably gonna win. So describe for me the loop. It is a loop when a customer tries out a new product and likes it, and, and is willing to pay you for it.
What is the, what is the full cycle of the loop? I think they'll lose more about the business owner than the customer.Right, so the business owner or the division manager, but you're the owner, you're the owner of the business in this situation.I'm the owner of a, you know, doing$40,000 a month Amazon business, and I'm trying to figure out how to apply some of these principles, so I don't have so much wasted product yeah so you don't have so much wasted product so what you're probably gonna want to do is develop a couple theories.I use this fancy word hypotheses or guesses. I like to use even a simple word, develop a few guesses because that's what they are guesses about how I could reuse wasted product, right?So maybe there's a different process in my warehouse, maybe I can shorten my lead times with my suppliers, maybe I can have better forecasting, [...0.8s] maybe it can play with pricing so that I, you know, make sure that I don't have a working catapult tied up in product that's not moving, maybe 4 to guesses.And the thing about which of these guesses are most likely and think both in terms of, well, which are the ones that I can, I think are likely based in first count principles, but also which are the ones that I can, [...0.9s] you know, develop a plan to test where I can basically say, oh, that's true.
Like oh, I need to play with my pricing.Okay, what's the, what is the shortest path so rather than Newton, I'm gonna spend a year playing with price, and you get an answer how can I find something that I have some evidence, one way to rather not that guess, because that's what it is.Yeah, it's true or not and do that quickly, right. And so, you know, again, the learning loop is about you and about not knowing the future, and in saying, you know, I use this for hyposis, let's use word guess, and how can I make, make more of those? How can I do more of those in less time and do more of those with fewer resources? So I'm curious.You mentioned doing more of those with fewer resources, and you also mentioned [...1.3s] working capital. If anybody is concerned about working capital on this podcast, who's listening to this, [...0.8s] definitely gonna listen to the last episode with Josh Hadley. They're a ginormous Amazon seller.And they showed me or walked me through a process where they're using [...0.9s] 90 day balance credit cards as well as some different [...1.5s] like, [...0.9s] like payment terms across different pieces, plus payment terms from their manufacturer to the point where they were getting six months of lead time before they had to pay.So, like, they would place the invoice and they didn't actually have to pay the invoice interest free for 6 months.Nice. And you were talking about, like, how do I without tying up [...1.4s] my working capital, yep, how do I create a situation where I'm, I'm finishing that loop more quickly and doing it with less resources?And so highly recommend people go back and listen to that episode.
Because that Harkins back to this classic [...0.8s] Dell Business School case study from a couple decades ago.Dell getting to the point where they basically received the money from the consumer before they had to pay for the parts for the computer from their customers, [...0.8s] and, you know, getting that marvelous world where suddenly you've got, like, your, you know, your head you're negative, right? Yeah, [...1.0s] this is a class.Exactly, that's exactly what he had done in so many ways because he was able to [...1.2s] iterate and extend where, you know, where his capital went just by increasing that.So he was able to, you know, but he was getting feedback loop from that first batch on month two and he still had four months to perfect the product before he had to pay for the first batch that he bought.Yeah. And, you know, thinking time back into a learning loop, right? So learning loop may not be tied into the necessary specifically. Like the working capital is one of resources you have, other resources you've got, management attention [...0.9s] you might have, [...1.2s] you know, I don't know, I, you know, whatever staff time or what, what not, [...0.9s] you know, if you're not in that situation of having that, you know, that virtuous cycle and, you know, negative, you know, negative cash cycle, [...1.1s] then you're saying, okay, well, how can I get there? And that's where you get in those guesses, right?So, it's like, you don't have to get there tomorrow if you're thinking like, oh my gosh, it's, I'm going to revent my entire business to make this happen.
It's like, well, okay, but what are this steps?What's that first, and maybe what can I do? And if there's three or four things I'm going to try to move me closer to that, let's go try them and let's do it, and let's try to do that as quickly as possible. And then let's gather the data and have the systems in place to gather the data to figure out whether it worked or not.So could I get that credit card? Could I, you know, I gotta watch podcast, you know, to see yeah, no, what are the different elements of the story? Can I do this? Can I do that? How can I try these different things and which of these things can I try more cheaply with less of my time and less of my attention?Another way, another way that I've heard this described as a bullet versus a cannonball 100%. So like, are you firing a bullet or are you firing a cannonball, right?Like, is this a, is this a quarterly long sort of thing or is this something you can execute in a week, you know, maybe less and understand something about what's going on? I'm not saying every bullets only a week and every cannonballs, yeah, quarter. But that idea of like, am I gonna fire a bullet or a cannonball at that target?
I think is a [...1.0s] terribly powerful thing to consider in terms of like what to do next. Yeah, but don't think that you're like a sniper that's gonna spend, you know, six months lining up that bullet.That's the only thing I'm gonna say about. The analogy is, you know, think about a guy that's got a lot of bullets and they're really cheap, and if they're not, you're gonna find a way to make those bullets cheaper.Yes, because you want to fire a lot of billets and hope one hits, right? It's not about thinking really hard like that. If you're thinking really hard before you do something, you're probably not doing it, right. That's probably a cannonball.Yes, that is, that's the cannonball. Um, and, you know, they're part of the two, you know, this idea you know, you gotta you know you're gonna fail, right like if you're not having some misses, you're not doing it, right, right.If you're not making bets, then you're just, I don't know what you're doing, but you're certainly not, you're not making bets like a bet, like if you're at the casino and you're making bets, some of those are not gonna work out.And similarly here, if you're having guesses, if they all work out, you're not really, you're either not really making guesses and really trying to push it on envelope, or you're not being true to yourself in terms of like recognizing when you were wrong. And again, that's a humility, like right on [...0.8s] right, it's okay.
That's like, that's part of the game.That's part of the deal, right? That you're not going to be right all the time. So one of the challenges I've found is I've tried to implement the lean startup across my different companies. It has been [...1.4s] the data gathering portion is a pain in the butt.Yeah, like I just there's some part of me that's like allergic to those [...0.8s] like survey part of gathering, like, like, and it's funny, like the, even the customer feedback portion of just like customer interviews, like there's parts of that that are just so painful.And so I think that's a big reason why a lot of entrepreneurs skip the data driven approach is because they just don't quite see the value in the data. [...1.1s]Yeah, you know, it's there we've got a straight places in on the software industry, you know, famous stories of people doing AB tests on two shades of blue, right?You know, coming out of when this data approach is really hot and we've been, I fell in that trap myself and my current company, you know, we were doing a B split tests on pages where, you know, you couldn't reasonably at our traffic volumes, you know, I'm gonna be, to be, [...2.1s] you know, get kind of the information and signal out that you want.
And so I think it's important to think about data not in terms of what's relevant for someone else at some other stage, but what's relevant for you at your stage. Right?And so the kind of data you're going to get if you're doing an AB split test on, you know, Amazon's homepage is mean different than the kind of data you get a small business owner. But that doesn't mean you don't get data. That doesn't mean you don't [...1.2s] evaluate.Okay, what can I learn here? Whether it's a qualitative interviews, whether it's, hey, my sales went up, whether it's I was rejected for that credit card or not, you know, it doesn't mean that you don't take [...1.4s] a piece of data. You know, there's sometimes there's cargo culting that goes on.If you know that expression in the world of Lean Startup, they think, oh, this other company did these things, I'll do those things. And therefore I will then be doing Lean Startup as opposed to saying like, you know, are you doing, you have an iterative loop.
Am I collecting data that's relevant?Are you doing hypotheses that you can test with amount of resources that are kind of small relative to your scope of control or the size of your business? [...1.5s]You know, there's a you know, you card called into a bunch of things that are provided for a bigger company versus things that you can actually apply in your current business.So how did the other thing I would say about the data side, oh, I love that. I, I think. Have you, have you come across any hacks that have made the data gathering part less painful? [...8.5s]Gosh, I don't have a great I don't have a great answer if that one, I don't, you know, I don't feel like I've got a like, yeah, sorry, I don't have a ready answer that, like I've got a hack here. [...1.3s]The biggest thing is, [...0.9s] you know, I'd say it's a first principle's approach. It's okay. Why am I gathering the data? What am I actually trying to answer how much data I need to actually give me [...0.9s] make a reasoned decision as to whether the hyposis was true or not, right?Not trying to be perfect, right? Not trying to have, you know, [...0.9s] was it you know the, was it in Lord of the Ring, Saraman has the ball and he can see the world, right? I think the palent here, right?That's the, that's that company palent here came from that. Like you don't necessarily need that. Like maybe some other personaels needs that, you know, what's the data? What's good enough data, what's good enough, good that is appropriate for your situation?Again, the cargo culting, that's one of the things I think that's been a little bit [...0.9s] in my world of software, there's a lot of cargo culting that goes on around continuous deployment and, you know, servers and how you do testing. And that's not really appropriate for this audience.But, you know, a lot of stuff kind of went, I feel really going to stray because people are like, oh, that's how somebody else did it.That's how I should do it. As opposed to asking the question of what's appropriate for my business, my situation, my scale of operations. Interesting. Yeah, like how do I, how do I make that more appropriate by [...1.1s] identifying how it fits into my business and connecting those different thoughts.Yeah, yeah. The key thing I think though, again, is there's a data piece, but not forgetting about the rife, you know, the bullet or reducing them out of resources and kind of recognizing [...1.5s] that you're not a failable.
Recognize you don't have all the answers.Putting yourself with a position of a little bit of humility about like what you do and don't know and going ahead and saying, you know, hey, I'm gonna go to try to find out the things that I don't know that aren't pointing me [...2.1s] interesting.So there's something to be said of like leaning into the weaknesses and seeing like how you can take a step back from it.One thing I would say is don't let your identity become wrapped up in the product. There's no faster way than to lie to yourself about how the product's doing. Then if it fails, I fail. Like if you're, if you say that about your business, if this fails, I fail. [...1.3s] You may need.There's some therapy options that are amazing and you need to disentangle because that leads to that humility that you're describing there, Chris, in terms of like the lack thereof.Yeah. And in my world, I've seen a lot of, you know, I'm in the software space. I've seen a lot of software companies that come in where often it'll be founding teams that come out of e commerce, [...1.7s] you know, and or in other software I've had.And so they think they come and they think they know all the answers and the answers they knew all the answers for their business, they don't know all the answers for the industry as a whole and for all the businesses. And it leaves blind spots.You know, I think you know I think it's a weakness for, you know, not having ever run, I haven't run in the commerce shop myself.But in some ways, it's a strength [...1.0s] because, you know, I can come into the space, no bias, say, hey, tell me what, explain to me what your problems are now. Don't tell me what your solutions are, and we'll work together. Finger solutions.Tell me what your problems are, what your pain points, and we can work together to figure out, like, okay, how we're gonna solve this stuff? Fascinating.So if you were to consider, so I just want to bring up these different points. If you were to consider product launches, reviews, product listings, advertising, preparing for scaling or selling and exiting those, those different categories.
And I'm gonna throw it in the zoom chat here just to make it easy for you to look at them.If you were to consider each of these different categories, which two would you say are the most important to implement something like the Lean Startup? [...7.6s]Well, you know, my default answer is going to be [...1.5s] which are the ones that are going to be, [...1.0s] you know, driver business right? Which are the ones that are there's risks which are the ones where [...0.8s] you think you're going to drive your business, so it's a little hard to answer off the cuff.My guess is preparing for scaling and selling and exiting are probably not applicable, so I'll set those aside. Preparing for scaling is almost by definition, [...1.4s] like, you know, kind of when I think of that, it's like, oh, I'm gonna be 10 times, I'm bigger than I am now or 20 times bigger than now.You know, you're right for that today. And, yeah, tenx is better than 2 x yeah tenx is better than 2 x but on the other hand, it's like, you know that will that will come right there are success disasters where you, you know, on the capital side, but, like, [...0.9s] you know, you can you can kill yourself preparing for something and then never, never get there, right.Similarly, selling in exiting that's gonna come from having the successful business, [...1.3s] you don't think you lean, you lean start up yourself there. [...1.3s]
You know, if I to make, if I was gonna go, I would probably guess, I would probably say I'm not good.I would probably say launches and listings, you know, those are the ones where there's probably you, probably you may very well have the most ego, you know, just have to remind yourself most frequently to be have a little humility. You may have the most ego tied up and to like knowing what your products are.You know, I think about our folks I work with in commerce and [...1.2s] as they get bigger, the way they get bigger is they get typically as they've got a pretty good head for product, they got some product that the world needs and for whatever reason they figured that out and they figured out how to reach that market.And then they get to a certain scale, like we've been talking about [...0.9s] 40, 50,000 a month and it's like, oh, my head's gonna explode with all the back office operation stuff. [âĶ1.4s]
But, you know, my guess is if people, a lot of people are gonna have, they're gonna be really have their egos, we said tied up. They're gonna have a lot of thought around, like, the product that, where it's listening, but how we're gonna launch it.And that's where one we're having a little humility and being like, hey, I might not have all the answers. We probably use the most support. And so you think, like, let me apply some of these principles in that space.I love it. And [...1.0s] if you were going to design an experiment where you're testing a hypothesis, and let's imagine that you're designing an experiment around a product listing, [...0.9s] and you are actually selling fidgets, so like fidget toys, the, the, you know, different, you know, spinners or different things like that. [...2.1s]The challenge that you're facing right now is that sales have just completely plateaued. You. You appear to be capturing as much of the market as possible, [...1.3s] but you're also not the only thing on that product listing page. From a standpoint of, like, the search results, you are the, the No.1 slot.
I'm curious as you, if you consider that scenario that I just pulled out of the air, okay, how would you design [...1.5s] a true lean startup hypothesis test to help you identify, [...1.4s] you know, what to do next? [...7.7s]Well, let me go first principles here on. You said leading in, I'm not a, I haven't operated an Amazon store myself, but I'm gonna start with, okay, [...0.9s] do I need to get more listings that are alternative products that show up in the same space?I am where I can leverage some synergy across the different products. [...1.1s] What question did you ask yourself to start coming up with these ideas? [...2.7s]I ask myself like, okay, so I've got a listed and, you know, I'm thinking about it from just being in, you know, my business and I'm thinking, okay, well, how much, how, much you know how much space do I actually have in the user's mind?
Can I get more space in the user's mind for alternatives, for other ways of looking the problem? [...1.3s]You know, look at my business, you know, sometimes do you start asking yourself why it's not happening? Like why are my sales plateaued? What, what, what if I waved a magic wand? Could you know what things would change that would make the sales not plateau? Like how do you start?I think that was the knowledge like there's humans out there right so there's humans out there and, you know, I'm reaching as many as I'm reaching with the current way. And he said, we're already No. 1, so I'm not going to get farther up.So presumably I need to either, you know, find other things that are gonna, you know, kind of show up so I can get more spots or I need to the next thing is going to is like are there. And I want to make sure that there's some synergy, right?So there's some, you know, some building up some brand or some, you know, some, some synergies in terms of like how they appear and then also be, I want to be looking at like, are there adjacent CES? Right? And this is all business school, business standard, business tank.
These are some adjacent seas that I can reach that or maybe other search terms or other categories or maybe with the same physical good, I can position in a different way.So now it's a variation of that. Maybe same physical product with different, you know, different marketing around it or maybe the same physical product, different packaging.I don't know. Packaging is hard to change and that's right on hypothesis. So let's say that the variation is the hypothesis you're writing.Yeah, I think the trap that most business owners fall into is they're like, that must be the answer. And they just dive in [...0.8s] and, and then they, you know, that's what they're hoping to confirm their own bias that that was the answer.And then they come back on the, look, sales went up by 5%, so that's definitely the answer, right? Like, but they didn't allow it to be a true test. How do you make sure that it's a true test as you're designing the experiment?Well, I think, you know, if sales went up 5% and I spent a small, like if I spent a nickel and sales went up 5%, I mean, man, that's cheaper than advertising, right? So, so let's start with, okay, how can I pull the resources down, the resources for that test down to get that signal?And that would make a bullet versus cannonball. So find what's the least amount of effort I could, I could take to achieve a signal that tells me I'm in the right I'm going in the right direction I'm going in the right direction and then being open to that signal, right?So like [...1.2s] looking for the signal looking for the signal going in knowing I'm looking for a signal not from me but from my customers, I think is a paint hourful way to consider that I like that.
Yeah, and then you're, you have to Opie be listening, you know, listening [...1.0s] out there and then compress time, right? So, you know, again, there's a lot of resources workingables one, there's other one, like how much management bandwidth you have and just time, right?Because eventually you love your business now, but at some point, I mean, depending on whether supporting your lifestyle and the way you want to support it, [...0.9s] even if it is, you may get sick of it, right? So you want to get more of this to happen faster, right? So time is absolutely a resource.Chris, I think we could talk for hours and hours about the Lean Startup and about all of these different pieces. You've definitely handed us some very good food for thought in terms of how to apply some of this, where to go into some of those different pieces and what that all looked like.I really appreciate your time. I'm curious, any anecdotal story that you [...0.8s] would want to share with the audience around your time working inside [...2.0s] these different startups and or [...1.1s] just in your journey being in the Bay Area for as long as you have been, oh my gosh, there are, you know, I'm [...0.9s] not a young man.There are a lot of stories. Some are pretty crazy, some are pretty [...1.4s] pretty normal. [...4.2s]You know, one, one lean story, you know, one one word, those one short two shore stories. So one kind of specifically brown lean. You know, we were you may have heard the phrase continuous deployment if you're in attached to the software world.Yep. [...1.2s] It was funny. So the guy who coined that phrase actually worked for me.
He went to a meet up in Palo Alto and we were having debate with the other engineers, myself [...0.8s] about should be continuous point where continuous ship. I was always partially continuous ship, but he said continues to deployment.And I think you can trace back, that's how you get CICD, the CD part of that, and I love it. There was a meet up in Palo Alta circa. It would have been, man, 2000, 2007, 2008 time frame. That's so cool. They were sitting around like, what are we gonna do? And Timothy Fitz was the guy's name.And second story was actually a little bit of a, you know, our founding story, right? So I said, you know, we didn't come out of e commerce. We actually started out [...1.3s] selling.
How do you get to running an e commerce company that does back off a software? You start out creating a video game [...0.8s] with a fireworks theme where you try to get people to create videos on a fireworks theme that they share.Because we knew a consumer entertainment [...1.0s] that very quickly, but this is listening, right? So we brought it.Wait a second, wait a second, you were gonna make a video game where I make a fireworks display, basically the makeup fireworks display and you basically set it to music and share it with your friends. [...1.2s]Car maybe not a great idea, but again, this was 2,009 and social media was different for those of you that are, yeah, I don't know what you're doing in 2009. It was 15 years ago now 16 years ago, now you may not real call what social media was like back then.It was two days, I do very different, but it was the wrong idea. But you know what? It didn't matter because we got together on June 1st was I think the first day we started our company. We brought it on.I think it was the first, second week of August.
We were in Mason City, Iowa at an event called the Pyrotechness Guild International, which is a fabs event. You should really check it out if you like fireworks. Um, and we put it in. There were 2,000 people, they just love fireworks.The point they're gonna spend a week in like middle of Iowa to watch fireworks and they're like, it's the thumbest thing ever, [...0.8s] oh my gosh. But, but what we really want is some software that could actually design real fireworks shows. [...2.0s]Oh, and so they said, can you hook it up to a can you hook it up to this firing system there's another Bender on the other side of the trade show.The trade show floor was the cowbarn just so clear, it's a county fairgrounds and that's where the trade show runs. And they swept it out, of course, beforehand.And so we talked to the folks across the way and the other folks across the way. And we showed up on Monday and by Wednesday, this is a used word pivot.
And we were software to design fireworks shows [...1.6s] and that we then integrated with hardware, brought that in the market.And then again, listening our customers followed it up [...0.8s] after a while. The liking of the fireworks show things interesting, but designing it shows another business.We really are importers. We bring the fires in from China, we import them, we warehouse them and then we have to set them up and we have to track the inventory, otherwise we're gonna go to jail. [...1.1s] You need to do inventory software for us. And it turns out that your value proposition is don't go to jail.People buy your software [...2.4s] when the pain you solve is don't go to jail, they buy your software. They buy your software no, it's a it's a pretty good it's a pretty good value proposition I think that takes the cake right there in terms of like like discovering a pain and following it all the way down.And I love that you took that, you know, your idea for this social media driven fireworks show thing and you went to like 2,000 people who should have been like the most excited in the world around this social media thing. And I'm sure there was probably a few people who were excited about it.I thought it was cool. And let's talk about data because data is appropriate.
So we were two folks, right? And we had a benchmark, we wanted to sell 40 licenses.So we went in with hypothesis, we went in with a goal to sell, take money, to change for a good [...0.9s] with the handicap of no one knew who we were and we wanted your money today, but we weren't going to give you any software until October [...0.9s] with three months later, however, we are only asking for 40 bucks.So, you know, like what's 40 bucks right even 15 years ago, 40 bucks wasn't that much money.Yeah, but that's an example for the data point like, you know, okay, it's not this big complicated thing. It was like, all right, let's go. Am I willing to risk my 40 bucks on the idea that this could be kind of cool?Oh, and I'll give you money back guarantee, but who are you?
And well, I don't really know if I'll ever see you again. So do I risk the 40 bucks and you were getting no, no, no, no, no.Well we started we had some of us is we actually did get, we got nose, but then it's like once we said, hey, we'll integrate with the firing systems, we got more yeses, right?And then we crossed our threshold of the number of people that said, okay, this is what we want to know, is that a positive result? And we did get, by the end of it, by Wednesday, we had enough people to say, yes, that it was a positive result on that hypothesis.Well, the fascinating thing is [...1.0s] you actually didn't get a positive result, you got a negative result and pivoted mid swing.Yep, that's right. Like, like it was straight up, this is not working. And so, so you're loop, you're talking about that loop, the loop, you complete the loop and Monday, oh shit, this is Rob [...1.3s] show up and people are like, this really isn't what we're looking for.
Tuesday, talk to new partners and think, oh, maybe this could work.Tuesday night at the hotel room at a menu item that actually downloads the data to this new system. Wednesday, show up and be like, hey, Nanao supports Oda Cue Fire and Advanced Technologies Fire.I forget the name of the other company. [...1.4s] I got the pictures to prove it. We've got photos in our company history book of this event and you can actually see the transition.I flipping love that. I think it's fascinating to hear you describe that test and the pivot, and then you describe future pivots that are as well. But you went in with an end in mind, okay, in order for us to consider this a positive signal, how many of these do we need to sell?And I think that if you go in with that sort of a hypothesis, that was the hunch, yeah, [...1.0s] you either wail or you won't. And you did because you pivoted on the negative result that you got on Monday, yep, into building an integration.
But those were some sleepless nights.Yeah, I mean, and the thing is is we started, the first time we started the company was on June, so that's, you know, we're nine weeks in right.So again, when you start a company, are you in front of customers gathering data in nine weeks? And if not, [...1.5s] okay, and what, how could you get there? And if not nine weeks, can you get it to four?You like, how do you get there? And you're asking for my this, the other thing, and it's soft for people because, you know, if you're selling somebody physical goods, you kind of need to get money in return.But, [...0.8s] you know, there's a great image Steve Blank, who wrote 4 steps the epiphany before this, [...0.9s] a great image of, you know, asking people with their they think they would buy your product cause, yeah, [...0.8s] of course your mom's gonna mind it. Everyone's gonna say they want to buy your product.Yeah, everyone's gonna do a pilot, right?
I've received a pilot but a non paid pilot, but like, [...1.0s] the real test is a paid pilot say no as well. It's actually even better. It's you go in there and you say, you know, hey, I, you know we don't have it ready yet.And the, the buyer won't let you leave the room because they desperately need the software so bad that they want to. They are like pushing money on you to make sure that you will actually build what they need, right.So they leap across the table and grab you and say, you will not leave until I can have a chance to give you some money because [...1.0s] I want this so bad.1. See, that's what's fascinating is if you find a need that's great enough, I e, you go to jail if you don't buy this software. They are jumping across the table, right, like, please, please build me this piece of, please take my money.And I think that's fascinating when you consider that, because really money is just a, [...0.8s] a currency of energy, right, an effort, a measure of effort and so am I willing to give up some of my hard earned effort money in exchange for my future effort?Heck, yes, if I don't go to jail, that's right. So [...1.1s] I think what you've described there is, is a fascinating example, and I think the same could be true in [...0.8s] the, the sellers that we're talking about.
If they've developed any sort of audience they've got.They've captured 500 Emil addresses, send out an email to that to everybody, and say here's the product, and guess what?You can purchase it for 50% off right now, starting to ship in three months, right, like, that's 100% a test, hundred percent a test and if they won't and hundred percent refund guarantee you. If you change your mind between now and then, like, like, you can.We're at a point where the, the level of trust in the internet has increased to the point where we're more warm, we're more willing to put our credit cards into random websites. For a long time, I used to tell my grandma, do not put your credit card in anywhere except Amazon.
And I had to tell her that she actually passed away this last year. I'm getting to the point now where I would have had to start telling her, okay, it's probably okay to put your credit card in some other websites, but do me a favor and send me the link before you do.Yeah, because I just the last thing I want is you to get a drink, but, but we're at a point now where that's become more common, and people have taken more of those risks, and it's out there, so you can ask, and you, you will get [...1.2s] a signal from the buyers.Yeah, you can, and if you can build an audience, right, that's one of the things that you, you know, you said there, right is you can, you know, we talk a lot about marketplace sellers, but if you can find a way to, to build that audience to get that direct connection, you know, there's this whole nother topic about repeat sales, and oh, yeah, how do you build brand, and how do you, you know, people talk about FBA fees, but, you know, if an Amazon fees but if that really is a way that you get the first sale, but you're gonna get more sales in the future that are maybe not, you know, that higher margin, you know, there's a lot.You can get in trouble that way, of course, as well, oh, yeah, it's 100%, but the, [...0.9s] but, yeah, so there's there's two stories, right?So there's one, [...1.7s] you know, a little bit of a lean startup story in the early days, you know, kind of coinage of a term a million other lean startup stories and a little bit of a, you know, an application for, you know, two folks working out their house going to the middle of [...1.1s] actually was on the edge of Iowa and actually the middle's Mason City.
It's not quite on the middle of Iowa, but going to Iowa, you know, a thousand miles away to test their hypotheses where the data was, did 40 people want to spend 40 bucks? [...1.1s]I love it, I love it. Chris I appreciate you how can our listeners reach out? How can they find out more about your inventory management software? Yeah, I love to talk about, you know, of course, our business. They can reach out to me.It probably best find me on LinkedIn these days. LinkedIn is great. I'm sure that there will be my name and stuff to be in the contigue information. Also, my company is Finale Inventory. We do software for inventory management, multi channel sellers.There's a million different on ramps, whether you're doing barcoding or warehouse management or FBA and trying to forecast FBA or multi channel selling a million different on ramps to kind of solutions to the problems. So Finale Inventory.Com is my company. I love it. And I can tell you based on some experience my colleagues Scott Sharp and Sierra Rey have had with the finale team that [...0.8s] they take good care of people.So appreciate you on the show today, and we'll wrap it up for this episode of Monetizing Your Mental Capital, [...1.1s] hundred percent. Thanks, everybody. [...23.8s]
