Webinars

INNOVATION FOR COMPANIES AND COUNTRIES

Entrepreneurism, Venture Capital and How to Commercialize Innovation

Andrew Goldner

Andrew Goldner,
Founding Partner,
GrowthX

Sean Sheppard presenting

Sean Sheppard,
Founding Partner,
GrowthX

ENJOY THE WEBINAR RECORDING

ABOUT THE WEBINAR

In this webinar Sean Sheppard and Andrew Goldner of GrowthX tackle two sides of the corporate innovation coin: commercializing innovation and corporate venture capital best practices. How should a company create new markets for unfamiliar products? How can corporate venture capital not only stimulate innovation but also strategically benefit a range of business functions? Too often, conventional corporate wisdom fails to address these challenges. Join Sean and Andrew as they offer their insights gained through decades of experience in the space where startups, corporates and innovation intersect.

YOU'LL LEARN

  • The market development process that companies launching new products must follow
  • How corporate venture capital can drive corporate innovation
  • Best practices for corporate venture capital

ABOUT OUR GUESTS

Andrew Goldner

Andrew Goldner

Andrew is a Founding Partner of GrowthX. He has been in the technology sector since 1998, based in New York City, Hong Kong, Singapore, and Palo Alto. Andrew began his career in technology as a lawyer for the early Internet pioneers in Search (Alta Vista and Yahoo), AdTech (DoubleClick), SaaS (Salesforce) and others while practicing law. He left private practice at Skadden Arps to join DoubleClick leading up to the Google acquisition. Andrew then joined Thomson Financial where he co-founded their financial news business leading to the acquisition of Reuters. At Thomson Reuters, Andrew served as Publisher of Reuters News, where he worked on innovation and design-thinking with nearly 3,000 journalists based in 200 countries worldwide. He then became Co-Founder and Managing Director of the company’s legal media business in Asia Pacific and the Middle East. After 6 years in Asia, Andrew returned to the U.S. and returned to helping early-stage companies. Andrew is a Kauffman Fellow, Regional Board Member of Venture for America, and a proud Mentor at Alchemist Accelerator in Palo Alto.

Sean Sheppard presenting

Sean Sheppard

Sean is a Founding Partner of GrowthX. Sean has over 20 years of experience bringing new products to market, including as a five-times sales founder. Sean’s deep expertise has been codified into a proprietary market acceleration program and entrepreneurial sales training curriculum. In addition to helping dozens of startups find product-market fit and predictable revenue models, Sean helps global multinationals to identify new applications for their existing technology portfolio, bring new products to market with profitable business models, and organize and train self-managing early product-stage sales and marketing teams. Sean’s successful corporate advisory track record includes work for Bridgestone, Canon, Faurecia, and Clariant. Sean is a globally recognized sales and marketing thought leader. He was named as One of the Top Sales Influencers You Should Be Following On Social Media, as well as Top 20 Inside Sales Influencers.

WEBINAR TRANSCRIPT

Rahim Rahemtulla:
Hi, everyone. Welcome to Silicon Valley Innovation Center. We bring you a webinar today with Sean Sheppard. Unfortunately, as advertised, we don’t have Andrew Goldner. He had a last- minute conflict, he does send his apologies. But we do have Sean and half the team does not mean half the webinar. In fact, it’s going to be quite the show, I’m sure. Sean, pleasure to have you with us today.

Sean Sheppard:
Pleasure to be here, Rahim. Thank you for having me.


Rahim Rahemtulla:

And so today Sean is going to be talking to us about innovation for companies and countries. And I’m going to hand over to Sean now – he’s got his slides – and I think, Sean, when you’re ready, then we’ll have you take us away.

Sean Sheppard:
Sure.

Rahim Rahemtulla:
So, yeah, let’s give you the screen. Hopefully that is coming through to you. There we are, yeah, I can see there, GrowthX. Very nice.

Sean Sheppard:
Wonderful. Thank you again, Rahim, it’s pleasure to be here. Again, my name is Sean Sheppard. I’m one of the founding partners of the GrowthX family of companies. A little bit of background about us – we are a Silicon Valley-based partnership that helps companies and countries commercialize innovation through capital talent, and know-how. We began several years ago as a group of serial entrepreneurs-turned-investors who’d all had extensive experience in building and growing companies. And as we started to invest alongside each other individually in different companies, we started to see a recurring problem that existed over and over again and that was our companies were failing for the wrong reasons, for reasons more or less associated with not being able to develop their markets as opposed to developing their products.

So we set about on this path and journey of trying to solve our own problems and through the course of trying to solve our own problems, at each step, we accidentally stumbled upon a way to create successful sustainable ecosystems for both ourselves, large companies, as well as countries and communities that are looking to create their own version of Silicon Valley where they are, instead of losing their top talent and opportunities to the Valley. And so what I want to talk to you about today is that journey, how we identified each problem, addressed it and how you can do the same.

Rahim Rahemtulla:
Sean, I want to interrupt you for one second, just because I have a message for the audience which I should have said at the beginning, and it is just to let them know, to send in questions throughout your talk. So if you have anything you want to ask Sean, if something comes up that you’d like to hear more on, please send us your questions in through the GoToWebinar panel and we’ll address those as we go along. So, sorry, Sean. Please, carry on.

Sean Sheppard:
No, wonderful. Well, now, it’s all over, Rahim. You’ve just completely ruined my flow. I’m just kidding. I’m teasing. I’m teasing.

So through the course of the last five years of doing this work, we started by addressing the first fundamental problem through what we now know as GrowthX capital, which is our Silicon Valley-based seed-stage fund that is focused on investing in technology companies, in particular, in the enterprise B2B space with our current fund, where there’s core platform technology and $10 billion service, trustable markets with a high degree of certainty, in our view, that there is a path to finding product market fit and by investing in them and helping them, we can actually help them accomplish that.

And through the course of investing in that we identified that, once again, there was a high failure rate of our companies and companies generally in the space. So we set about to address that problem, both at the structural level for venture capital, whether that’s our venture capital, corporate venture capital, or sovereign wealth money – it applies in the very same way. So we started to invest in companies, then through our market acceleration program – or what we call MXP – we created a private accelerator that was focused on developing markets and making money as opposed to developing products and raising money. Through the course of having success and turning around those failure rates by investing and then actually actively helping them through our accelerator program, we identified a lack of talent that was a lack of skilled workforce, if you will, that could actually help companies grow at this stage.

Because it’s very important to understand fundamentally, whether you’re a mature company, a new company, a community trying to create an ecosystem, it’s not about the stage of your company, it’s about the stage of your product in a given market. And that’s the dynamic where most of these companies go to die and most of these, these products and innovations fail to gain traction, long-term sustainable traction in the market.

So we wanted to focus on solving that problem as well and, therefore, we launched GrowthX Academy because we didn’t see universities and corporations training people to be early-stage marketers sellers, design thinkers that could actually move the needle and help companies get traction and work alongside great product-focused founders and great technology to actually get traction in the market. And that created a virtuous cycle. They worked on real projects with real startups in our portfolio in our community, they got the experience they needed to make the correct successful transition into technology, or to digital skills that they didn’t have from their prior experience. In addition, the startups got free help and then connections were made where they could actually employ and hire those folks, in addition to providing great due diligence on the periphery of our portfolio to see how companies behaved with the help we provided. As we like to say, health is our due diligence, people have a tendency to behave very differently when they’re running a company before you write them a check that when they do after you write them a check. We learned a lot from that. And what it also did was create a repeatable, scalable, profitable business model through tuition and services that we can provide so that we wouldn’t be a slave, if you will, to the assets under management as a way to grow and share with the world the work that we were doing to help companies grow as a result of that work.

As a result of that work, large corporations started to approach us as they were starting to do startup scouting, starting to work with our companies to be customers as well as potential investors and acquirers. And they said, “What you’re doing for these startups is incredible. Can you help us? We’re struggling with taking new products to market, especially digital products, or connected services to our existing products that we haven’t launched before. We don’t have this expertise in-house.” Most companies, again, have people who are skilled for mature environments, core business, predictable things, sometimes they can do adjacent, continuous innovations on top of what they’re already doing or, in other words, continuous improvements. But the role and function of taking a new product to market is a very specific skill set that they typically lack. So they asked us to start getting involved in helping them commercialize their innovations in the same way that we were commercializing them for our startups. We found that very intriguing, so we went ahead and started to do some work in that area and, as a result, it’s been very successful. And now what that’s created is this virtuous ecosystem where we can invest in companies we get through our capital with a structure that is fully aligned with the investors, the founders, the people that want to work with them and the people that want to work for them and those that want to buy and acquire and invest in them.

And as we grow those companies through the market acceleration program, we’re able to de-risk the opportunities, reduce the failure rates, create more insights for our investors as well as those companies’ investors and the companies that are working with them on which ones are going to win and which ones are not and which ones require more help than others and what kind of help that looks like. And then we’re able to support that through the Academy as a way to reskill and upskill an existing workforce to help develop and grow those companies through the various aspects of market development, sales, marketing, design and, as a result, it has built and created the two things that are missing from any successful innovation ecosystem: a framework on how to execute on that innovation – in other words, how to take a new product to market – and then also a business model where it can sustain itself. So through a tuition-based program, with the Academy and the professional services provided through corporate and MXP, you can actually start to build something that’s sustainable, that does not require you to go back to your corporation or even your country or your government or public sector continually asking for more money to run and sustain these projects.

And that’s how our innovation ecosystem has been developed. And as such, now countries have started to approach us and say, “How do we build our own version of Silicon Valley? We have been wasting time and money and resources investing in one-off programs and accelerator programs that are focused on developing products and raising money as opposed to developing markets and making money. How do we bring everybody together in a meaningful way? How do we create alignment between the public sector, the private sector, the educational community to create job growth, economic development in our own community and start to diversify our economies away from our traditional legacy economies and into the modern technology and digital economies that exist?” And so we set out on a path to help countries do this in the same fashion.

So some of our recent experience is with some large companies, large accelerator programs and universities as well as with countries, as I mentioned, in helping them all create their own successful ecosystems. Whether it’s creating a corporate venture capital strategy and a startup scouting environment to source new technologies and bring those in, that you can leverage to create a competitive advantage. Or helping them launch new products into the market, whether it’s reskilling and upskilling a workforce or starting to introduce this to graduate school programs so that you have an actual skillset if you want to be an entrepreneur or work with entrepreneurs beyond just traditional MBA environments. And the reason this is such a major problem is that in the innovation economy, we’re not preparing our workforce with the necessary knowledge, skills and behaviors to be successful in a world where things change so rapidly. As many of us probably already know, the average time on the S&P 500 index today is 15 years, whereas in 1970, it was 75 years. So, what do we do to retrain our workforce for a future we can’t predict where everything needs to adapt and change? And the reason it’s we’ve gotten to that point is what we call “the age of applied technology”, where we argue that it’s never been easier to build a product and take it to market, it’s also never been harder to actually get traction for it in the market because there’s so much noise, because it’s easy to fast follow on most technologies now. The first mover advantage isn’t what it used to be.

So today, as a result, there’s more emphasis being placed in importance being placed on the role of the market developers, the selling founder, the selling CEO, as we call it in a corporation, the commercialization lead, the person who has the skillset of some marketing, some sales, some product to facilitate and drive the learning necessary to build a more whole and complete product in the market today. So we’re not saying that market development is more important in product development, but it is just as important. And a perfect example of that is how the venture community has changed its investment strategy. It’s no longer investing in ideas; it’s investing in real products with real customers and real revenue. So the problem that we’re ultimately addressing in these innovation ecosystems is that we’re all missing the how. How do we efficiently invest capital that helps founders succeed or our own innovations? How do we accelerate that market development, not just product development? How do we develop the talent to succeed in an innovation economy? And how do we meaningfully engage with the community of customers that exists that wants to support that, that also have their own concerns about trying to maintain and create new competitive advantages in a world that changes so quickly. None of us want to be the next Yellow Cab in the age of Uber. So it requires a coordinated and supportive ecosystem.

So when we look at it from an investment standpoint, the first thing that we did was try to say, “Okay, we want to provide more help at the seed stage, when we invest in a company.” And if you look at the traditional venture capital model, you’ll see that it’s ultimately broken.

They operate on this thing called the “2 and 20 model”, which means 2% of all assets under management can be allocated towards operating and running that fund, 20% of the profits of the fund can return to the general partners who run it. But it’s that 2% that really creates the problem. So if we write a check for $100,000 at the seed stage to a company that’s raising $1 million dollars, we’re paid $2,000 a year to actually care about that company and help them. That’s not feasible, you can’t really do that. So what does the venture capital community do? They usually leave them to their own devices and let them alone until they get to where they need much, much more money and, as a result, most funded companies fail. In fact, +70% of funded Silicon Valley seed-stage startups fail and 80% of the reasons they fail have to do with markets and the people’s behaviors, not with the product itself, yet they’re 80% focused on product.

So how do we change that? Well, we have to be able to fund an effort to help them grow. So we created a fund structure that was very different. We went to our LPs, our investors and said, “Look, we’re not going to just do the 2 and 20 model. What we’re going to do is try and earn additional equity. And by earning that additional equity, we’re going to ask you as LPs to fund that help.” So what does it look like? We have an agreement with our LPs that says, “For every dollar that you allow us to invest of LP capital into a market development team that is employed by GrowthX to work with our companies, we’re going to get at least $2 in additional equity back for that work based on the current valuation.” And so as we help a company deliver more insights and help them grow, increase the value of that asset, we’re actually receiving much more than $2 of equity for every dollar invested. So, if I write $100,000 check, then I put a market development team to work on helping that company for nine months and I’ve spent $200,000 on that team, I have $300,000 invested in the company, but I’m earning up to an additional 5% of equity in that company, which can equate to – and has to equate to – at least 2x my initial investment in terms of equity. So that $200,000, I need $400,000 in equity in exchange for that minimum, but we’re actually getting much more than that, because we’re increasing the value of the company.

So as long as that formula is maintained, we’re able to actually get in, help a company get traction in the market with a milestone-driven approach where we earn the equity based on results. And that is the essence of what our market acceleration program is about: it’s focused on marketing product and making money. So we’re working alongside the company, we’re teaching them while we’re doing so and then, eventually, we’re replacing ourselves with talented individuals. They may come from the Academy, it may come from somewhere else, they might come from inside the organization if they show the right skills and attributes necessary to be involved in a commercialization effort.

But, typically, we find in a large corporation that the skillset required to do that isn’t already inside or can’t be identified inside and often when they take a new product to market and they give it to an existing salesforce, it struggles because it hurts, it distracts from current sales and core business as well as makes it really challenging for them to focus on the learning required to get traction for that product in the market. So then we prepare that talent pool and we train the workforce and we connect the corporate venture capital, the startup scouting, the acceleration programs and the innovation projects all together in a systematic way, with a framework that allows everybody to find out the truth about where their product fits in a market, create a functional learning organization in support of finding that truth and then ultimately find profitability. And in the course of it, you actually can create a thriving ecosystem of your own that’s full of founders, funders, talented people that want to work with them and their customer base.

So to provide a little bit more detail on that, as a corporation, what can you do today to implement or start developing an ecosystem?

Well, the first thing is, if you have any new innovations or you struggle to get them to market or you have a pipeline of those, the first thing you have to think about is, “How do I organize effectively with accountability and ownership to execute on getting a new innovation to market?” Because innovation should not be a hobby. That’s number one. Number two, “What is the role of the person or persons that lead that effort? What skills and attributes do they need to be successful in taking a new product to market?” Because they’re not necessarily just a marketing person who’s used to doing things at scale, they’re not necessarily a salesperson that has good relationships with maybe who your early customers might be and it’s not just a product manager, director, or technologist. It’s someone with a combination of all the skills, of each of those areas, that can embrace ambiguity, can communicate well across teams, can drive the learning in pursuit of that truth, knows how to implement a reality while selling a vision and help you go through what we call “the sales learning curve” to find product market fit for that specific product.

Prior to that, if you have an innovation stage gate process that’s focused on technology development, research and development and product development, what can you do to incorporate market developments at the beginning of that process? So that you can identify and prioritize what innovations to invest in and how to collect data for the market about whether or not you’re solving real problems, as opposed to just building products, developing IP and stacking up an inventory of that IP. Because just like in startups, the failure rate in innovations is also quite high. In fact, according to Nielsen over 90% of innovations fail in large corporations. And they fail for the same reasons – they fail for market-related reasons and behavior-related reasons.

In addition, they also have another level of complexity. They’re not just seeking external product market fit for their for their new product; they are also trying to find internal product market fit, where they can seek and understand who their executive sponsors should be, how they should find them, how they should talk to them, and how they continue to show them progress, even if that progress is not as obvious as they might like it to be, which is why a market development framework is so critical. Because it shows you how to measure learning and that learning will lead to revenue, which creates the momentum and starts to change the culture around what it means to innovate. Because you can create functional learners out of a small team of people that can actually build, grow and develop a market or segment or a new revenue stream outside of the core business before its transitioned back into that core business of it needs to be at all.

On the other side, if you are trying to identify technologies that you can leverage either to invest in, acquire or buy and incorporate into your current roadmaps and leverage for new technologies, do you have a cogent and sound strategy across your different business units about what you’re looking for, and what the future looks like, what kind of technologies you want to source, how you want to approach and attract great founders to your ecosystem, how you want to ensure that they’re successful, not just with you, but with other customers? One of the biggest challenges we found in helping large corporations innovate is that many entrepreneurs are afraid to go early-stage and work with large companies because they’ve heard all the horror stories about how the bureaucracy and the pace at which they move has slowly killed many startups. So what are you doing to create a brand that’s going to attract the hot young entrepreneurs that have the great technologies that you want access to? What are you going to do to help them succeed? How are you going to structure the way in which you invest in them? So it’s fully aligned with the way there are other investors think about things which is very challenging. Oftentimes, people don’t like to take money, start at the seed stage from large corporations, because they set different terms than the venture capital community sets and that often causes them to miss significant opportunities.

And then, once you bring those in, what kind of framework do you have to help identify which ones get more help than others? Which ones get incorporated into your innovation stage gate process? Which ones do you partner with? Which ones do you buy from? Which ones do you acquire or invest it? And what does that look like for you and your business? So instead of just thinking about technology development and product development, we have to start thinking about problem, definitions and market development sooner, spend more time with fewer customers focused on recruiting them into our vision, but implementing our reality to learn faster and innovate not just on our products and technologies but on our business model, so that we don’t get disrupted out of business. And our CBC strategy, our corporate venture capital strategy, should be focused on that novel thesis of, “We want to invest in the things that would put us out of business” and how do you structure that.

As a country or community that’s looking to build its own version of a Silicon Valley ecosystem, you need the same thing. You need that how, you need the framework that goes with it, you need a business model that’s fully aligned between your investment vehicles, your funding mechanisms, your educational community, your corporate community and your startup community. And that happens with programs that are designed and delivered through the Academy or an Academy-style program, that educates and reskills and upskills the workforce in support of the needs of those local corporations and those local startup communities with a tuition-based program, so you don’t have to go back to the government every year looking for more funding. In addition, you can provide the accelerator to attract those companies and t the investors and the corporations as a way to learn the best practices necessary through the services provided to help them innovate and grow up.

So Rahim, I think this is a good point to stop and field questions and continue the conversation.

Rahim Rahemtulla:
Yeah, thank you, Sean, yes. Why don’t we come back, maybe, to our webcams? I think this stage and we can go with a little bit of the video then. Lovely, yes. And I think we probably don’t need your screen at this stage, Sean. And can you can turn it off there at your end?

Sean Sheppard:
Yes, sure.

Rahim Rahemtulla:
I think, no. Sorry.

Sean Sheppard:
You’ve got control of that? No?

Rahim Rahemtulla:
Oh, there we are. Perfect, perfect. Thank you, Sean. Thank you. Thank you. So I understand, Sean, that market development is at the heart of your philosophy, of the GrowthX philosophy.

Sean Sheppard:
That’s right.

Rahim Rahemtulla:
But I’m still struggling a little bit to understand what this is.

Sean Sheppard:
Sure.

Rahim Rahemtulla:
Now, product development seems to me to be really, intuitively, I seem to understand what that is. I have something I’m developing it, I think it’s a great new thing that people are going to want – that seems to me to be product development. But market development, I’m struggling to take that away from the abstract and understand what that is in a concrete sense.

Sean Sheppard:
Sure, in the most concrete sense, 80% of the reasons new products fail have to do with the markets and the people that are taking those products to market. That means there’s no need in the market right now, the timing is off, there’s lack of differentiation, they’re misallocating the limited time, money and resources they have on developing ideas and developing products, as opposed to identifying and addressing problems for their customers. They’re not involving them soon enough, they’re very product-centric or technology-centric as opposed to problem-centric and customer-centric. And it’s generally inculcated or, let’s just say, embedded in the culture of people who are very product-oriented. What makes them great technologists and what makes them great engineers and what makes them great product people is also the same kind of thing that, typically, makes them weak at talking to humans and being focused on solving problems for humans and being more oriented around what people’s needs are.

Rahim Rahemtulla:
Sorry, so you mean not being too much of a nerd, not being too stuck in the basement or in the laboratory but getting out into the world and actually seeing what are the real problems, the real issues people face, and sort of reverse-engineering that into a great product.

Sean Sheppard:
Absolutely. So as venture capitalists, we take successful entrepreneurs who have exited from our companies and we literally pay them and put them in our office and let them hang out and try and figure out what is the next great problem in the world to solve, and they’re not thinking about building a product. And we call these entrepreneurs-in-residence, if you will, and I think every corporation needs an entrepreneur-in- residence. I also think they need commercialization leaders who can actually drive the execution of the learning because it’s all about that. You can get where you want to go faster if you’re focused on learning it as opposed to just knowing it or assuming it. And so how do you drive that effort in an organized way? And that’s what our framework is all about.

The first time I raised money for a funded company 20 years ago, I raised $8.5 million on an idea. You can’t do that today. I could build that same product today, 20 years later, for about $200,000 because all the infrastructure exists. So, in absence of deep, deep, deep science, which is very important. And even in those cases, we’re building deep, scientifically proven, or we’re coming up with all sorts of intellectual property in a big company. They’ve got an inventory of intellectual property, ideas, patents, etc. How do they know what to work on first? Who’s actually doing that work? And I don’t mean heavy, deep-market research about, “A market is this big and therefore, we have this kind of opportunity and this is the segment and this is what’s going on in that segment.” No, I mean, “Have we found three to five early customers that we either currently have relationships with or don’t, that have innovative and early adopter mindsets that are willing to invest the time, money, resources on their side to help us build a more whole and complete solution than what we already have? Because if we do, we can take five-year process and turn into a five-month process. But you have to have an approach or framework for measuring that learning, approaching people to find the truth, to be willing to admit that you don’t know what you don’t know, to stop assuming and start constructing hypotheses and apply the scientific method in a way that helps us accelerate that learning.

And then you have to have a team that’s dedicated specifically to that effort. And you can do it faster and cheaper than you could do it otherwise because one of the major, again, problems that these innovations fail is there’s lack of ownership and accountability. I see a lot of shared responsibility, where everybody gets excited about an idea and a product, they want to take the market until it starts becoming a challenge. And the moment they start to get challenged by it, they stop managing the learning and they start managing their own career and they slowly do what I call “the Bart Simpson GIF” and they back away into the bushes. And then all of a sudden, that part of what they used to have interest in is no longer interesting to them because it’s too risky. And that’s where innovation like this cannot be a hobby – people have to make a dedicated investment.

Now, that investment needs to be measured at every step in the in the market development process the same way it is in the product development process. And we break the whole world up into two sides: one side is product and technology and research development, and the other side is market development. And my point is that, in the age of applied technology, we have to place as much emphasis on market development early over here as we do product technology and research and development. And if we do we can find out very quickly, of the 42 different things we’re working on, which one should we dedicate resources to first with the highest likelihood of winning in the shortest period of time possible with the greatest return on that learning? And how do we have that conversation? And then who do we how do we go to market with that? And I don’t mean at scale because everybody talks about everything at scale. We have to do the things that don’t scale now to scale later. And that requires focused, dedicated effort on a small hypothesis of what ideal customers might look like, how to find them, how to talk to them, how to get measurable results through a value creation model that’s quantifiable that eventually becomes repeatable and predictable. And, therefore, we can then move and transition that to a scalable effort and have a conversation about whether or not we deploy this to our current marketing and sales force or we need a different one because it’s a different kind of sale, it’s a different kind of product and it’s a different kind of way of approaching the market.

Or, therefore, we, we have a new business model that we’ve never had before. And in this innovation economy, we have so many digital business models that are being built on top of traditional manufacturing or cost-of-goods-based business models. And most of these companies haven’t faced it, haven’t done it successfully, don’t know where to start or how to do it, so they do it in a very sort of traditional sense. And that that’s why we call it the age of applied technology: I will argue that it’s never been easier to get a product up and running, it’s never been harder to actually get it sold and get traction in the market. And the latter is a byproduct of the former, if that makes sense. Did that help frame it for you a little bit?

Rahim Rahemtulla:
No, definitely. I mean, there’s so many products these days, so many products.

Sean Sheppard:
That’s right.

Rahim Rahemtulla:
I mean, digital products. Every day, how many new services, apps, “I can do this for you”, “A few taps”, this, that, there are so many of them all the time. But none of them is like a hardware breakthrough which I have to get. It’s not like the Internet.

Sean Sheppard:
Right.

Rahim Rahemtulla:
It’s not like the Wi-Fi router, which, when that’s created, I just have to have it, the market is already there for that sort of thing, you almost knew that straight away. But when you build some kind of digital product or service, you don’t necessarily have that security.

Sean Sheppard:
No, and nobody cares about your product; they care about their problems and whether or not those problems can be solved by you.

Rahim Rahemtulla:
But do you even know if we have these problems before the product appears to solve them?

Sean Sheppard:
No, we don’t, because we take a technology-driven approach to developing innovations, we don’t take a market-driven approach.

Rahim Rahemtulla:
But as a consumer, this product might come along and it will solve a problem which I may not have even known I had.

Sean Sheppard:
Now that’s a famous Steve Jobs kind of quote and there’s always an exception to every rule that, yes, people oftentimes don’t know what they want until you give it to them. And I say, that’s a nice high-level platitude and it does happen, but it’s rare. But that will always be a thing and, until science can predict the future, I don’t know how you solve for that. What I do know, practically, though, is that there’s a way to reduce failure rates, the costs associated with innovation and the time associated with getting to your truth. And that is the through a framework of market development focused innovation, not tech, just technology, and product development focused innovation, where you are out there focused on solving problems for real people.

Our most successful technology investments are with people who have commercialized a product based on solving their own problem or need. They were actually living that problem every day and so they went out and set out to solve it for themselves only to learn that they could commercialize this because many other people like them had the same problem.

Rahim Rahemtulla:
Yes?

Sean Sheppard:
How does that work? It works because they have a greater understanding and insight into what’s really going on than anybody who’s just developing a product because they’ve got a piece of technology and now they want to leverage it or where they’ve got some sort of idea that that they haven’t actually validated with any degree of depth and certainty as somebody who’s lived it. Insights win, not technology.

Rahim Rahemtulla:
Right. And isn’t that a good argument for why the best companies, the best founders, I suppose those products and companies which are founded on, that happens because that founder has some unique insight, because this is something that they themselves know about? And so then, what about that idea, the serial entrepreneur? Can you really be successful then, if you just keep trying to go around solving problems but you don’t necessarily have that personal insight into it? Can you do that over and over again?

Sean Sheppard:
Yes. It doesn’t mean you’re going to be more or less successful than somebody who’s trying to solve the same problem that has those insights within that specific industry. But as I said, it’s the framework. So the fundamental premise is, as I mentioned early on, it’s not the stage of your company, it’s the stage of your product in a market. And one of our fundamental beliefs is, while products and markets are unique, certainly, the path to product market fit is not.

You have to do the same things. And if you ask any successful entrepreneurs, especially serialized, successful entrepreneurs, they will tell you the same thing, that looking back, all the things that we bring to the table in our market development framework are things that had to be asked and answered in order for them to be successful. And so it’s not that we have a secret sauce, it’s just that we – myself and my partners – are all market-side, business-side founders and co- founders, we’re not technologists.

I like to make the joke, I can’t even spell HTML, but I understand how to take something like an HTML and then identify how to connect it to solving a real problem for someone, a meaningful, valuable problem. And that’s the part that we don’t spend enough time on early enough in our innovation process or innovation strategy or our approach. And we’re not about building strategy decks and, and, and having these high-level discussions about, “This is what we’re going to go do.” We actually go do it. The whole idea is to spend more time with fewer of the right kinds of people early. I like to say our job is to find Mr. Right Now, not Mr. Right because if we solve it for Mr. Right Now, our hypothesis is that, we will solve it for Mr. Right tomorrow.

Rahim Rahemtulla:
Yes.

Sean Sheppard:
But there’s only a certain kind of psychology, mentality and people with a clearly defined enough problem set, recognized need and actively seeking a solution in the market that we can actually work with right now. And we don’t need to work with all of them.

Rahim Rahemtulla:
Yes.

Sean Sheppard:
We may be a big corporation with 300,000 customers, but how many do we really need to work with today to learn what we need to know to serve those 300,000? What does that look like?

Rahim Rahemtulla:
So narrow it down. Narrowing it down to that whole group, in some sense, it sounds to me like a really, very significant part of the work early on.

Sean Sheppard:
Yes, which is often overlooked.

Rahim Rahemtulla:
Yes.

Sean Sheppard:
Which is often overlooked. The more time we do this, the more times we go through this, the less people we spend more time with, if that makes sense.

Rahim Rahemtulla:
Yes.

Sean Sheppard:
We reduce the size of the cohort, the number of potential early customers and partners, and we spend more time deeply focused on them, solving their problems while answering our questions.

Rahim Rahemtulla:
Okay.

Sean Sheppard:
That’s really what it’s all about asking those questions in the right order, and then answering them. Number one, what resources do we have to execute today if we were going to go actually try and test this? How are they organized? What’s product related? What’s market related? How do we create this feedback loop with a commercialization function that’s actually responsible for going out and driving us through the learning curve and flattening it and shortening it as quickly as we can?

Rahim Rahemtulla:
So, Sean, maybe I’m chicken and egging this too much, but then who starts that process? As the corporation or the startup, you go and say, “We have some ideas. Are any of these good for you?” Or do they say, “We have these problems”? What if they don’t even know what their problems are? What if they don’t know?

Sean Sheppard:
Sure. That’s fair

Rahim Rahemtulla:
They don’t know.

Sean Sheppard:
That’s fair. So there’s a couple of answers to that. Within the context of how we invest in startups, how we help them and how we help companies, there’s already a product. They’ve already tried and tested it somewhere, even in limited scope. So beginning with the fact that there already is a product, then the question is, what’s the value hypothesis behind that product and who is it for? Who’s it solving the problem for? When? Where? How? And how do we measure that and who cares? And ultimately, that begins the conversation. Then, that means you create these ideal customer profiles for today versus tomorrow and then you actually go test by having real constructed conversations, what we call our conversation framework, about, “Here’s our value hypothesis. Here’s how we think we can help you and why. Let’s have a conversation to see if that’s in fact the case, whether or not you care about this. It’s a real problem. If it is, how would we measure it together to learn and what should we do next? And if not, that’s okay, we move on to the next one.” But people don’t do that. They focus on acting and developing a whole and complete product based on assumptions or high-level market insights versus direct contact with that end-user and together building and developing that.

Now, that’s one aspect. So the other aspect is, “Okay, I’ve got an idea. How do I test that idea?” Same way. You just say, “All right, my idea is this and I think it can solve this kind of problem for this type of person.” “Great. Let’s go talk to that person and see if that’s, in fact, the case, before we build anything, before we invest a dime on it.” Or you’re sitting there with one technology that has 42 different applications, potentially, that you’ve mapped out. Which one do we go after first? Well, we go through the same exercise. “How do we prioritize for the highest likelihood of learning and converting with the least amount of time, money and resources required to do that? And let’s go find early adopters and innovators in that community. Let’s not sell to them, let’s recruit them for joint development and feedback and let’s learn and then let’s make data-driven decisions.”

See, 90% of this stuff is done offline in a way that’s analog, as I say. So you need to be able to construct your value hypothesis in a way that collects the truth from the people that you think are most apt to adopt today, not forever, not three years from now, once your whole vision is realized. And that’s the challenge, whether you’re a founder, or you’re a large company innovating, you go do all the research to show how big a market opportunity is if we pursue this, and then you don’t come back down to earth and say, “Who’s my first customer? What are they? How do I? What is it about them that makes them the best early customer? What can we learn together? Where are they? How do we find them? How do we talk to them in a way that gets us to the truth as quickly as possible about whether or not that’s okay? And are we behaving in a way that is truly about embracing the truth, whatever that truth is, and then making the right decisions based on what that truth is.

Rahim Rahemtulla:
Yes.

Sean Sheppard:
And how do we accelerate that. And as a result, we’ve taken these innovations that have struggled to get off the ground for years and gotten to their truth in months, because it’s about focused effort and discipline to a framework and a methodology that is measurable and easy to communicate throughout the organization so everybody sees what’s going on. And then all of a sudden, they start to change their behavior about how they do this, how they organize for it, how they manage it, how they invest in it, and how they prioritize this backlog of potential innovations that exist.

Rahim Rahemtulla:
So this is a mental framework as much as anything else.

Sean Sheppard:
Yes, because companies fail for mental problems as much as they do for product problems.

Rahim Rahemtulla:
Yeah.

Sean Sheppard:
To use the term mental, but it’s behavioral.

Rahim Rahemtulla:
Behavioral, sure.

Sean Sheppard:
Yeah, absolutely. It’s not the software that wins; it’s the hardware, it’s the people.

Rahim Rahemtulla:
Yeah, so how does that affect? And so what if you do find who you think is your ideal customer, the end-user, you want to talk to them, you have ideas, you want to find out more about that problem? To what extent does it depend on them being open to innovation? Are you going to expend effort to try to change their mind if they’re just not in that place?

Sean Sheppard:
No, no, no, no, the whole point is to find people who are willing to tell you the truth now. And so you spend as much time as you can to understand the heuristics, behaviors, history, characteristics of the individual humans as well as the organizational psychology to find the innovators and early adopters that are willing to tell you the truth. Because, Rahim, I’ll tell you the truth: in today’s marketplace, people don’t want to tell you the truth if it creates more work or conflict. So how do you change your approach and your behavior to create an environment where people feel like it’s okay to tell you the truth?

Rahim Rahemtulla:
Yeah.

Sean Sheppard:
And that’s a critical part of the market messaging milestone. Our market development framework for corporations has four milestones. The first one’s market foundation and discovery. That, again, what resources do you have to execute? Where are they? How are they organized? What do we currently know from past history and trends about what work we’ve done today to do this? What technology and tools are using to track our existing and current efforts? And then who is our customer for right now? And then who’s our customer for tomorrow? And you build out a series of these customer profiles, and then you prioritize them based on what you know and what you think you might know about which ones will work with us now versus later.

And then milestone two is all about messaging, how do we talk to them in a way that gets us to that truth as quickly as we can and accelerates that functional learning opportunity? And then milestone three is all about measuring that so that we get to the point to where every stage in that market development process, we go back in real time and iterate on it, and continue to ask ourselves a question, Is this still true? Do we still have the resources we need? Is this still the way that we acquire customers? Are these the right customers to be talking to right now? Is the messaging resonating? If not why and what should we do about it? How do we continue to develop the product in a more whole and complete way so that we’re more right tomorrow than we were today? And you rapidly iterate on that methodology. And you have to do it with the right set of behaviors and the right cadence in order to accelerate this path and drive the efficiency to the truth. And through the course of that you will find your truth.

We don’t ever promise revenue. I mean, how can you predict the future when you don’t have a past? That’s ridiculous. What we promise is results around where your product fits in the market, if at all, what to do about it, how to accelerate the learning and create a functional learning organization, not talk about this culturally – that’s too broad and ethereal. Functional learning starts with two humans, it starts with the first two people on the team, the person on the market side representing the product in the market and finding those early customers and talking to them, and the person who’s iterating on the product in response to that, and then it goes out from there. And then, ultimately, through that, you can find whether or not profitability exists.

Rahim Rahemtulla:
Yes, and so, excuse me for interrupting, but so, I mean, you guys are teachers, is what I’m hearing. You’re teachers and if nothing else, out of this process, those who go through it with you will learn how to behave, how does it behave in this framework, how to do this, because it seems like that is really what it’s about, actually, learning how to conduct this process.

Sean Sheppard:
Yeah, we talked about it manifests itself in three ways, or it operationalize itself in three ways: we can do it for you, we can do it with you, we can teach it to you. And typically, what people want us to do is “do for” on the first project so that we can demonstrate the capability. Then “do with” by doing it in concert with people. They’re starting to organize and focus on doing it alongside of us, so that we can transfer that capability in and then they can build their own commercialization team with their own commercialization leads, and all the resources on product market, and customer success to drive that learning process and get to their truth. And then they can rinse and repeat it across every innovation or anytime they take a product to a new market, or they take a new product to any market because it’s always about that dynamic. That’s where 90% of the failure goes to die – in the execution. So if there’s one simple “why all these things fail”, it’s because there’s a lack of execution on commercialization.

Rahim Rahemtulla:
So the company fails to develop the market.

Sean Sheppard:
Correct. Because they don’t execute, they don’t have a framework for executing at this stage. It’s about the stage.

Rahim Rahemtulla:
Right. And so when you’re talking to these would-be customers and when you have them and you have ideas, that is actually developing the market in a sense, is it? Because as much as you are learning about that customer and their problems and tweaking your product, at the same time, I suppose you are teaching the customer as well, in a sense, to use your product. Is that right?

Sean Sheppard:
Yes. Our goal is to share this framework with the world so that that people stop failing for the wrong reasons. Look, we were all just successful entrepreneurs-turned-investors who got tired of getting emails from startups saying, “We’re shutting down the company because we ran out of money or we couldn’t raise more money.” And we would say, “B.S. You pissed away the money we gave you on the on the wrong things.”

Rahim Rahemtulla:
Yeah.

Sean Sheppard:
“And we know you did because we know by the questions we’ve asked and the ways that we’ve tried to get involved in helping you. You don’t apply any kind of market development fundamentals or framework for solving real problems for customers because you’re focused on messing with your widget.”

Rahim Rahemtulla:
Yeah.

Sean Sheppard:
“And you’re biasing yourself. You’re either preventing yourself from doing it because it’s not your natural set of behaviors to get outside of your comfort zone and actually go out to the market, start talking to humans about real problem, so you don’t have that business acumen, you haven’t had that experience, or you lack a co-founder that does or a first sales hire that’s actually taken a product from zero to one, as opposed to one to N,” which is what another major mistake we often make in a big company or even in startup.

We go to take somebody out of mature market, mature products, mature sales, with support and predictability and a book of business and everything that they need to just be a loaded gun and point and shoot in a very specific direction, and we stick them in an ambiguous environment and we ask them to go do the same thing. And they don’t know how to do it and they get frustrated, you get frustrated because you have some expectation, you’ve set up some forecasts that are rooted in nothing but B.S. about how they’re going to perform and when, or it may be based on some other market sector or some things, history somewhere else. And 80% of the time that fails too. So it’s whether it’s taking somebody out of an existing sales environment, putting them into a new product, or it’s taking somebody from mature market and putting them into a new product – it’s all about stage relevance.

That’s why we launched the Academy, because stage relevant talent isn’t just about, Do I know how to sell market or design? It’s about, Do I know how to do it at the learning stage when a product is 90% wrong? Because 90% of what we take to market is wrong, especially in software, and we don’t follow the same discipline, learning curve, in software that we do with manufacturing. We don’t produce a million widgets until we know we can mass-produce them at scale, so we have a process and a methodology for getting ourselves to do that. But we don’t do that with software and digital products; we sell them as if they’re whole and complete when they are in fact not.

Rahim Rahemtulla:
Thanks, Sean. It’s been very enlightening, and I admire your passion as well. And so do you stop yourself getting too excited about products? Because just a revolutionary new product doesn’t mean that much to you in the end, I suppose. And, Sean, I’m gonna have to say, we’ll probably just have to end on this question.

Sean Sheppard:
Yeah, in my early days as an entrepreneur, I fell in love with products and people – not markets. And I failed every time I did that. And, at the end of the day, it doesn’t matter what our product does – it’s what it does for the market and whether or not the market thinks it can solve a real problem. And so our emphasis should be there. And that’s the whole idea and it’s the core essence of what building your own successful ecosystem or your own commercialization looks like: it’s you have to have a framework that’s measurable, that will get you to the truth faster and cheaper than you otherwise are getting to it today.

Rahim Rahemtulla:
Well, thank you so much, Sean, for all the insights.

Sean Sheppard:
My pleasure.

Rahim Rahemtulla:
It’s been it’s been a real pleasure to get a window into your thinking, into the GrowthX mindset and framework. I think it certainly sounds like one which can make a real difference, I think, to a lot of companies out there. So, viewers, I would encourage you, reach out to Andrew and Sean if this sounds like something that you would be interested in hearing more about after the webinar today. We’re going to be sending you an email with the recording, we’re going to have Andrew and Sean’s contact information in there as well because I’m sure there’s plenty more questions that you might have, you want to learn about different aspects of this. So take that up with them by all means.

And just on a final note from us at SVIC, I just want to say that if you want to see how transformation works, how technology can be applied in practice, have a look at some companies who are really doing this on a daily basis, then what we do is a Leading Digital Transformation. That’s what we call it, it’s an executive immersion program in Silicon Valley. We run that several times a year, the next one being in January. So check our website at siliconvalley.center for details on that.

And don’t forget, we have more online live speaking events like this one as well next Tuesday at 10 am Pacific and we’re going to have Widya Mulyasasmita of Venn Biosciences and she’s going to be telling us about innovation similar to what Sean’s been telling us about today about commercialization of innovation, but she’s particularly focusing on the life sciences, so do join us for that. Sean, once again, thank you, thank you so much for everything today. And I think that’s where we’ll wrap it up. So, from me, from Sean and from all of us here at SVIC, it’s been a pleasure having you with us and we will see you again next time. So, goodbye.

Sean Sheppard: Cheers.

info@svicenter.com 1-650-274-0214