If You Build It, They Will Come - Daniel Johnson

[00:00:00] Speaker A: Foreign. Welcome to another episode of the Worst Advice I Ever Got brought to you by your friends at Smith and Howard. I'm your host, Sean Taylor, along with my producer, jb. And today our guest is Daniel Johnson. Daniel is the founder of We Scale Startups, where he works with startups and growing companies on marketing, positioning, product strategy, and figuring out why some ideas connect with people while others completely fall apart. He's somebody who spends a lot of time thinking about human behavior, especially the weird ways emotion, ego, confidence and logic all collide within business. The more successful or intelligent people become, the more complicated that can seem to get. Today, we're talking about failure. We're talking about assumptions, emotional decision making, startup culture, and why it's really just so hard to separate yourself from the thing that you're building. Also, JB's probably going to accidentally pitch Daniel three business ideas before this episode are over. Is over. That's. That's my over under jb. But without further ado, let's get started. Daniel, welcome to the podcast. [00:01:09] Speaker B: Thank you so much. Very pleased to be here, Daniel. [00:01:13] Speaker A: Our audience is always on the edge of their seat wanting to know what's the worst advice you ever got? [00:01:18] Speaker B: The worst advice I ever got was build it and they will come. [00:01:23] Speaker A: Build it and they will come. You're touching my heartstrings here, Daniel. I'm going to reference a movie that's probably debatably could be younger than you and most of our listening audience, Field of Dreams. Build it, they will come. Tell us more about why. Build it and they will come was the worst advice you ever got. [00:01:43] Speaker B: So it was kind of the advice that I actually got from my family when I was a kid, because I was that kid in school selling sweets on the playground. Suites turned into vending machines, vending machines turned into E commerce sites, E. Com turned into SaaS. And that's kind of where I got to today. And at the beginning, I always thought that I was a mini Steve Jobs, even without knowing who Steve Jobs was at the time. And I would build all these great ideas only to get no customers. And it was so frustrating because, you know, as a kid, I would speak to my friends, my family, my neighbors, and they would all say, this sounds like a fantastic idea. You should 100% pursue it. And I would. I would spend all my time, despite my academics and my extracurriculars and my friends and I would work on these projects only to fail again and again and again. And I guess I'm glad that I had this naive optimism so that Every time something failed, I didn't feel personally upset about it. It was more about these failures were the catalyst to sort of where I am today. [00:02:58] Speaker A: I can see why it's the worst advice you ever got because it leads you into just kind of saying how it all happens. But let's kind of walk through this a little bit. Daniel, so you made reference to your family and when you were younger. Can you just maybe give us some background on that? You know, tell us about your parents and your family and just. So you were a young entrepreneur is what it sounds like. Can you. Can you elaborate on that background a little bit? [00:03:20] Speaker B: Yeah, I was. I was definitely influenced by my parents. My dad was an engineer and he was very passionate about that. And I think that influenced me in terms of understanding how things work and having a natural curiosity about infrastructure. My mom came from a very corporate background, but was also very entrepreneurial. She retired, retired quite young, and then started a series of businesses herself. But when I was a kid, I remember I very vividly had this identity of wanting to be an inventor. I'd obviously heard the word somewhere, and from the definition, it aligned with what I wanted. And I love creating things, solving problems, which kind of led to startups. [00:04:04] Speaker C: What was the first thing that you built that you were like, this is awesome. I've built it. This is going to be incredible. I'm going to be famous. And it just didn't work out. [00:04:12] Speaker B: I mean, there's tons of, like, silly things that I built that I thought were really. [00:04:15] Speaker C: Yeah, that's why I want to know, like, especially with a kid, you know, the first one. But you're. Because, you know, you're so excited. You get that childlike wonder to it. Like, I'm going to, you know, million followers overnight. And just like, nope, just didn't happen. [00:04:26] Speaker B: I mean, the first thing I ever did was a blog called truly random.net and I specifically remember telling my mom, I cringe thinking about this so hard. She asked what it was about and I very dramatically said, everything and nothing. And she said, what does that mean? And I had no clue. And I would just, like, write reviews on the most obscure things. After that, I did a lot of other web stuff. I did some domain trading. I had an E commerce store called the Teenage Millionaire, which was about, like, other aspirational teams that didn't go as well as I would like. But the domain is now probably as valuable. More valuable than the shop itself. Yeah. I also did electrified. I would electrify bicycles. [00:05:12] Speaker C: Okay. [00:05:12] Speaker B: I think that was the first Proper business idea that failed. Everyone loved the concept of it, but I didn't really consider parental involvement in, in the, in that process. And as a result. And also money. Kids, kids, kids have a few pounds, a few dollars. They don't necessarily have like, you know, $200 to spend for a bike. [00:05:33] Speaker C: Yeah, right. [00:05:34] Speaker A: What are the common traits of a failure in a startup, Daniel, that you found in your years? [00:05:39] Speaker B: This is the number one. People don't speak to customers because there are a few different reasons. The British, we hate getting on the phone with people. It's very, it's very embarrassing. But generally it comes from a sense of I know better than my customers and I get where people are coming from. Because when you're really passionate about something, you've spent so much time and energy on that idea, you genuinely think you understand it. But then when you launch to market, people don't get it. And it's not that the business is a failure, it's that maybe you didn't communicate using the language that your customers speak. And actually you can just sort of align it that way or maybe look at a different market. I used to run a mental health company and our product was, I went to therapy for years, changed my life, best thing I've ever done. And I had also sold my first company at the time so I could afford private health. Whereas it's very difficult even if you have some serious issues, at least in the uk, getting professional mental health. And I partnered with a therapist and she basically said the vast majority of my cases are young woman. I wish there was a way rather than sort of treating the symptoms, I wish there was a way to help build these women before they have these issues. And so we developed an app and the app was focused on these young women teaching them sort of emotional skills so that they can cope with big emotions. Long story short, we found that actually there was a bunch of middle aged men in America using the same app. And when we did investigation into this, it was basically came from pretty severe arguments with their partners about their capacity to communicate. And they searched similar terms and discovered our app. And because we were able to explain it in really sort of from a beginner perspective. So that's a very long winded explanation to say like you haven't always failed. It's more about this version is misaligned, what needs to be true in order for a business to work. And you start with the core stuff like people buy this product, I can make this product, people will buy this product. This, this price, I can sell it, at this thing get really specific. You know, like each business is a lot and when you fail, it means one of these assumptions is wrong. It means something here needs to be updated. It doesn't mean the entire thing is wrong unless the core assumption is wrong. [00:08:01] Speaker A: People are passionate about their ideas and part of the reason they start up businesses is to get those ideas to the masses. Right. Everyone should benefit from what's in my head, but I have to imagine that's very emotional versus objective. Right. So how do you, how do you walk that line of. Is a, is emotion a problem when you're pursuing a startup and how do you get objectivity into the mix to make sure it actually has business merit? [00:08:28] Speaker B: I think use emotion to motivate you, but then also what you believe to be true is only part of the picture. It's really difficult to understand how other people think in the way that you need them to. And that sounds very like wishy washy, very philosophical, but actually I found it to be very, very true. Even today, after seeing hundreds of startups, there's still ads that I see that I think, oh, that's ugly and it does really well. Or products that people pitch me to invest in and I'm like, good luck, not me. And they, they do really well. [00:09:01] Speaker C: Yeah, it's not necessarily your person. It's like taking your personal preferences out of your thought process when it comes to everything, even your idea, like as a baby. So like when you're making a, you know, like one of those, those decisions, like, you know, kind of logically, you need to have a certain amount of passion. I think that's what kind of Sean was hinting at is like you, if you don't care about it, it's going to be hard for you to wake up every day and work on something. [00:09:25] Speaker A: Right. [00:09:25] Speaker C: So how do you, where do you find the, you know, the. I'm going to find the right customers, but I'm also going to do my idea in the right, in the way I like it. Or do you just. Is it impossible? [00:09:37] Speaker B: Understanding ultimately, like, what is my vision and my goal? Like, what am I trying to achieve with this company or this product? And then understanding the journey to get that might not be the journey that I want, but accepting that to be true in order to achieve your ultimate objective. The most effective companies I work with are the ones that speak to their customers the most regularly. [00:09:59] Speaker A: You, you probably also have statistics on just the frequency of startup failures and I would imagine the percentage has to be really high. Right. So. So again for an entrepreneur who throws 10 ideas out there, how many actually hit and become successful businesses? And. And do they know this going in or are they blinded by the fact that they just think everything they have is going to work? [00:10:23] Speaker B: I think in the beginning, you're kind of blinded because you don't know what you don't know. And you, you need to develop a picture of the world of, of how it actually works versus what you think is true. And that that's why it comes from failure. You know, that's why I like failure. I didn't like it at the time. It sucked. I felt really bad because my ego was involved and I felt personally a worse human being. But then I grew up and I learned that my professional success, my personal value are two separate things, which ironically has reduced my motivation at work, but probably means I'm a healthier person anyway. And I think you need to fail those first few times to understand those things to be true. And then it becomes easier to do the things that you didn't want to do. [00:11:10] Speaker C: Yes. Once you're like, okay, look, I do want to know. I want to do it my way. You know, that's the whole point of being an entrepreneur. Right. And, like, and I love this, and that means other people are going to love you. Once that kind of fails, that can sort of melt away and then. But you need that in order to become a successful entrepreneur. In your experience. Is there an example of, of in, like, the real world that you've seen, like, two companies, like, doing these kind of things and finding this out the hard way and then changing their whole. [00:11:41] Speaker B: Yeah, all the time. Alignment with customers is, is just a human issue. It's really difficult to maintain, like, a really accurate perspective because bureaucracy, opinions, people's perspectives really influence that. And arguably, the bigger the company, the harder it is to maintain that connection. IBM and SAP, I think, are great examples. Something that I found really interesting is every decision is made by emotion and justified with logic. I was working for an ad agency that was working for IBM and we were competing against SAP, and we were speaking to some customers and we were trying to understand how they use SAP and stuff. And at the end of every one of my conversations, nearly all of them would say, gotta go, Daniel. Gotta pick up my kids from school now. The ads that we were running were really boring. They were like, we're 0.14% faster than IBM, and we're like, you know, 2% faster in these specific use cases. But one of the ads that I created was Get Home to Your kids sooner with IBM, Watson. And it crushed it because ultimately when those people wake up, they don't wake up thinking about how do I improve efficiency. They think about how you do. Do I make sure my boss is happy that I've hit my quotas so that I can leave home on time so that I can have dinner with my family? And it means that even the most boring of decision making comes from some sense of emotion. Yeah, thanks for coming to my TED Talk there, [00:13:19] Speaker A: Daniel. It's got me thinking though, right? We're talking about emotion in this and we're talking about talking to your customers. What are people buying most of the time? [00:13:29] Speaker B: So people are always buying like a better life in some capacity, right? You know, you buy something and you, you look forward to how is my life going to improve? Because I've purchased this item and there's always something. And I think the better that we can understand what that is for our customers, the more effectively we can, we can sell to them. And I don't mean that in a, you know, junk spam thing. I think I actually kind of detest junk because I think my job is to try and find the people who are most relevant for the products that I'm working with. The people who are going to discover these and go, fantastic, this is exactly what I'm looking for. [00:14:04] Speaker A: This is not just a business proposition, right? It's in, it's outside of business too. It's in politics, it's in personal life. People make decisions really in a selfish manner looking for what improves their life. Who am I going to vote for? What store am I going to buy stuff at, et cetera, et cetera. So our listening audience can really, they, they shouldn't be listening to this, going, I'm not an entrepreneur, this doesn't relate to me. This is literally like the human condition in their everyday lives, is it not? [00:14:31] Speaker B: Yeah, great point, 100%. And what's crazy is that we're all influenced by it due to the nature of how our brain works. And the other bit is how much it influences all of us, both individually and as people. It's why people make stupid decisions. Regardless of where you are on the political spectrum, you always think that the people completely opposite you are idiots regardless of, of where you are. And it. And people make self sabotaging decisions and it all comes down to this sort of like we are led by our emotions in ways that we didn't realize. But then you realize, you look at the data and you see how easy it is to sort of Influence people. Now if I was really a bad marketing ad person, I could probably sell things that would probably make a lot of money, but it would probably hurt people through the types of products I would sell or the things I would have to say. And in the communities I'm in, I know people who sell fat loss devices that don't work but make millions every month. I know pyramid scheme people. They're great marketers and they're really friendly on these forums. It's kind of surreal. I was talking to this one guy who's helping me fix my work email and he sends 6% of all global spam. He's the single biggest sender. [00:15:51] Speaker A: Oh my God. [00:15:52] Speaker B: Is based in Canada, just, just a dude at his house and sending 6% [00:15:58] Speaker C: of the world's spam emails. [00:16:00] Speaker B: So every time I check my junk I'm like, oh, that's, there's Jerry. [00:16:05] Speaker A: Jerry. I'm going to look for Jerry and we're going to. Yeah, we junk folder when I'm done here and see if I can. That's incredible. Hey Daniel, we scale startups your business. When you're working with an entrepreneur with an idea that wants to get it going, what are you commonly having to do to open their eyes to what really needs to happen? Like what's the most common redirect or the most common thing that you have to help these, these customers with? [00:16:33] Speaker B: Usually it's, it's understanding what product market fit really is. So for those who haven't heard about a product, market fit is basically have you developed a product or a service that people will actually pay for? And it sounds like a really clear thing. But I think a lot of people are easily influenced because what happens is they'll get 100 people saying this is fantastic, but zero people spending any money and that, you know, it's free to say congratulations, but it costs something to buy the product. Everyone understands how big that gap is, but I don't think they appreciate quite how big that gap is. You'll get a thousand people who are willing to do work for you who won't buy the product because it, money is like really precious to people for obvious reasons. [00:17:23] Speaker C: Yeah, I said earlier, you know, you know what you, you don't know what you don't know. What's worse is I'm reminded this Mark Twain quote from that they use at the beginning of the big short. But it's like, it's not what you don't know that'll get you in trouble, it's what you know for sure that Just ain't true. And it's like, I know for a fact this is a thing. And you work all your idea based on this assumption or this reality that you're living in that is not actually even correct. And then that's when you get yourself in real trouble. So, like, is failure mostly that you, in your experience about bad execution or poor assumptions? [00:17:57] Speaker B: Poor assumptions, okay. And it's interesting because you, arguably, you can apply this to any aspect of your life, really. You meet a lot of entrepreneurs who started lots of businesses and they've all failed. And it might be easy for an external person to look back and say, hey, you just haven't done this thing. But what happens is a lot of people, we. We make the same mistakes again and again without realizing it. And entrepreneurs do it because we're very excited about our startup. And then when that fails, we kind of have this, like, bad feeling about it. It makes us feel bad because our identity is shared with the startup. And also we're excited about whatever the next thing is, so we don't spend time to reflect and understand what was it that didn't go well. And over time, that builds. [00:18:48] Speaker A: How do you figure out as an entrepreneur when to give up on an idea, when to pivot? Like, when it's. When's it really not working? Versus I just need to try harder. I mean, how do you consult your clients on that? [00:19:05] Speaker B: That's a very good question. What I generally recommend is there's two ways. The first is Vibes. I think that comes a point where a founder's motivation stops or goes below where they really want to work on a business. The second answer is a lot more boring and a lot more technical, and that's by looking at all the assumptions, defining specific experiments for them that are quantifiable, and then validating or invalidating them and seeing if the fundamental assumptions that build your business have been invalidated. And that way. And there is a framework to follow that. And that way you can look at it and sort of say, hey, it's sort of either not my fault, or like, actually, this is a really illogical business model. I need to take a step back and think about it so you can [00:19:54] Speaker C: scientifically figure out if you're wrong. [00:19:57] Speaker A: Yeah. Yeah, for sure. [00:19:58] Speaker C: I have a math problem for you. And if you. And it'll tell you whether or not you're doing the right thing. [00:20:02] Speaker A: I love it. If somebody's listening right now and they have an idea, you know, what should they do tomorrow? [00:20:11] Speaker B: I think they should write it down because it can be really difficult. You can have a great idea, but the way you articulate it and the way that someone else hears it are like two separate things. So what if I explain a concept to you, what's in your. What's in my head, and then what ends up in your head are more different than you. You. You may believe. So that's like, one bit. And there's a lot of frameworks you can follow for this, like the minimum viable startup. Obviously, you got the business plan. It's a bit old school nowadays, but there's a lot of frameworks you can follow that help to sort of get those different bits that are bouncing around in your brain in a clear and logical format and you can share with others. So get something down and then update it. The most successful companies are those that update it as regularly as possible that aligns with their customers. You know, your first version is going to be, like, completely wrong. And that's fine. It's not about being right. It's about having something and then continuing to iterate. [00:21:09] Speaker A: Well, Daniel, you're making me think of this podcast, right? I mean, it was a. I just was thinking in my mind, I think we should do a podcast. And then I. So I wrote it down, and then I went to experts like JB and Julie Barnes and said, hey, we should do a podcast. Let's throw me some ideas out there. Right? And just. And our first iteration of the podcast, Daniel, was nothing like today's version of the podcast is. We've evolved it and changed it over time. So, you know, I think what you're saying, we're living right now, you know? You know, JB and I are living right now on this podcast. So having you as a guest today is really cool because it just makes me think over our past, what, roughly three years as we went from ideation to today's recording. Right. Almost 100 episodes, I think, JB, that we've done now. And, and it's. It's neat to think through what you just said, those four questions and how it, you know, creates a. Creates something that's valuable to others. And hopefully when our listeners wake up in the morning and open their eyes, they can't wait to get to their podcast devices and listen to. To this episode. I know they'll be excited about yours, Daniel. Really appreciate you joining us today. Cool. [00:22:23] Speaker B: Glad to hear and thank you for inviting me, jb. [00:22:27] Speaker A: What stood out to me is that Daniel wasn't telling people to stop believing in their ideas. He was saying, belief can get you started. But it can't be the only evidence that the idea works. [00:22:38] Speaker C: Yeah, right. You have 100 people telling you, hey, this idea is great, but if none of them are willing to pay for it, you know, it's a different kind of feedback you're looking for. [00:22:46] Speaker A: Yeah, yeah. I think that's where build it and they will come falls apart. You know, building is only the beginning. You have to understand who it's for, what problem it solves, and why somebody should actually, you know, would actually choose it, you know? [00:23:00] Speaker C: Yeah. You have to be willing to hear that the customer might want something different too, from maybe what you pictured when you started out. You know, he built an app for young women and he found out that it was actually middle aged men who were using it. You know, it's a good reminder that the market doesn't really care what you imagined your product will be. [00:23:18] Speaker A: Now, the other piece I appreciated was separating a failed idea from your value as a person. Right. When you build something, it's easy to make it a part of your identity. Right. You get indoctrinated, you know, immersed in this thing and then it doesn't work and it feels like you didn't work. [00:23:34] Speaker C: Yeah. Like he was saying, you know, failure is information. It's painful information sometimes, but still information nonetheless. Yeah. [00:23:42] Speaker A: And if you're willing to listen to it, talk to people you're trying to serve, and question what you think, you know for sure, the next version might be a whole lot better. Well, Daniel Johnson, thanks for joining us. And thanks all of you for listening to the worst advice I ever got brought to you by Smith and Howard. We'll see you next time. [00:24:00] Speaker B: Sam.