The Physics of Startups
00:23:12 · RC
[00:23:12] S0: Yeah. And then they they either uh you mentioned their unblocked life. It's like uh, which might be a subscription, it might be a project that you have delivered for them, and it and it, you know, it gives them the thing that they wanted. It's like that the happy, satisfied customer at at the end of it. Um, and uh for folks that are watching on uh you know Apple or Spotify or or YouTube, I just pulled up um uh if you're if you're not watching, I'll drop the link for this uh for Rob's Substack in the show notes. Pull it up because Rob has visual, like given basically the visual of imagine this is this is the flow diagram of a startup's uh factory, and it goes potential customers, and then you hit the three machines, pipeline sales, and delivery. Uh, and then you know that the product of the delivery is the package case study essentially that you can then you know kind of like feeds the sales actually part of it, or feeds the pipeline part of it. Um, and there's also this this important element here that you haven't hit yet, which is the drop-off. Like there's waste that happens uh in each of these steps, which is also you know a big part of manufacturing and you're trying to minimize waste. What what do you do with that element of of this, Rob?
00:24:24 · Rob Snyder
[00:24:24] S1: Yeah, so so when you look at your startup as a factory, not as a funnel, not as a like whatever. Um you look at it as a factory, you're then able to import like manufacturing thinking into it. And manufacturing thinking is all about how do we how do we like how does someone pull through the factory with the least amount of waste? And and how do we eliminate unnecessary steps? What does waste look like? How do we root cause analyze where there where where things are getting stuck here? And that's the that's the um thingy. So what I tend to find when when I um when I look at the typical startup sales calls, when they come to me, what I find is that roughly 95% of what happens in their sales calls is waste. It is not just like unhelpful, uh, it is counterproductive. It is convincing the person not to buy. And so when you eliminate that, then right, you're you're making the sales process more effective, compressing it, you're reducing unnecessary steps. Unclear why, but everyone seems to believe you need an ROI calculation in your sales process. I don't get it. I don't get why everyone thinks they need a group demo in their sales process. And you just and so, um, and so all of these steps are added in when um they're actively counterproductive. And so when you have this conceptual model in your head, you then start asking the question, okay, what's minimum necessary to get through the sales process? What do they actually need? And you design, you redesign your sales process around that and you continuously improve it when it's the constraint. And you figure out what you figure out what the constraint is in this the manufacturing system by saying, okay, if we improved this part, like let's consider improving all the different parts in the system uh based on what uh how do we decide which to improve? Well, yeah, you improve the one where if it improves the most if it improves uh the output of case studies uh on a given unit of time increases the most. That's how you grow the fastest. And that's what manufacturing thinking gives you. It you find the constraint.
00:26:44 · RC, Rob Snyder
[00:26:44] S0: Yeah. And the um what that uh maybe real quick, I I realize I didn't get the examples. Uh can you give me two exam one or two examples of a case study? Like what is um, yeah, what is that what does that look like? [00:26:59] S1: Yeah, okay. Let's let's just do like mine with lovable. That's like a this is a classic one, or or even yours with lovable recently, as as uh we could talk about, which is um I want to create a website, I want to update a website that reflects my my kind of brand needs or whatever. Um right now, because I don't know, I'm about to release a book. That was my case, about to release a book, and my Google Doc website is not good enough. Um uh, but I consider using Squarespace or Wix or one of those point and click ones. And I the limitations on that are I don't hate myself enough to spend five hours clicking around in a point and click thing. I don't have the skill or patience to do that. So I am right, like I am stuck in that situation. Lovable comes around and says, Hey, maybe just tell us what you want to build and we will do it for you. And so I just rage type a three-paragraph essay and I have a website and it's done. And so, and so that's like the example, but but every single example of poll that we've given in this podcast, it in all of my newsletters and everything that like those are all just case studies.
00:28:10 · RC
[00:28:10] S0: Yeah, perfect. Okay, thanks. Just wanted to bring that and actually I kind of like that one because literally I heard your case study and it pulled and and then I pulled through that and like switched my website to lovable because I also had a deadline that I was gonna hit and I needed to not need to wrestle with a website for 15 hours or 20 hours or whatever, multiple weeks. Um, anyways, let's okay, you just brought up constraints. Um, okay, so pipeline sales delivery, like, okay, I get it. You gotta find people, or they've got to find you, or I've got to sell to them, I've got to deliver it to them. Um, why is uh pretend I'm an idiot, which shouldn't be super hard. Why have I been doing this whole time? Exactly. Why where does constraints come in? Like, what does the constraint look like? Um you know, choose, let's say that it's let's put it in the middle. Actually, sales is your constraint. It's not pipeline and it's not delivery. What like what does that constraint look like and why why is that the thing that you need to tackle rather than optimizing pipeline or optimizing delivery?
00:29:14 · Rob Snyder, RC
[00:29:14] S1: Yeah, so so um what that what that would look like is um you are having 20 sales calls a week and no nobody is buying, or like very few people of those are actually turning into customers and they're dropping off for a variety of reasons. And so what you can see there is like, okay, cool. Um if I make my product better in that situation, it's not gonna matter because I'm having 19 sales calls per week that are not converting into customers. If I increase the number of, if I double the amount of sales calls I have per week, my life just gets double as bad, like twice as bad. So there is if I like improve that, the pipeline step here, it's not going to change things. Really. It's like it's not gonna improve the number of case studies that I produce um at the at the end of this factory. [00:30:09] S0: Um and especially for uh like for a software or for an AI solution where delivery is basically unconstrained frequently there. It's like, you know, there's probably some setup, but that frequent but that is probably not the constraint, or it might not, it's you know, you can infinitely focus on improving your your products, or you know, but but as long as sales is the uh is the constraint, and you mentioned like they're either not converting, it can also take the form of it takes six months to sell to them, or you know, it's uh it it involves.
00:30:42 · Rob Snyder
[00:30:42] S1: It takes all of my effort to close these deals. Everyone is magical. Like it could be, it could be a variety of things like that to where we say, okay, cool, let's right. Improving pipeline is not going to change things. Improving delivery is not going to change the kind of production of case studies, the like throughput, the the amount of output of case studies here. Yeah. And and so we're like, okay, cool. The constraint on growth is the sales process. Then we can also we can import a bunch of other men, like manufacturing people have thought about this a lot. They have a concept called five whys, which is you just try to figure out, okay, why is our conversion rate so low? Why is it doing and then we just get down to the root cause of that, attack whatever that thing is, and then your constraint will move. So let's say it's, oh, it turns out, this is very common. Uh it turns out that our sales problem, the reason we're converting one out of 20 customers when we're having 20 calls per week, is that we are targeting the wrong kind of person. We're targeting a person who doesn't have pull. Right? That's an example. Okay, cool. So what do we do? We change targeting for the pipeline step. And then we see, okay, cool. Now we have 20 meetings a week and 10 of them convert or something like that. It's like, okay, cool. Now there's probably another constraint in the factory. There's like maybe it's still the sales step, because when we look at the number of people, you have 20 sales calls per week, 18 of them have pull, but only 10 of them close. Then the question is, okay, what uh what's going on with those other eight? And you go and root cause analyze that and say, okay, this is if we can solve this, we're gonna go from 10 to 18 case studies produced per week, or whatever it winds up being. But just illustrative, but this is the kind of the and and the kind of the interesting thing here is this is you you just ask the same question every single day. What's the constraint? What do we and and therefore what do we need to dig into, get to the root cause, ship a fix, and then move to the next one?