Note the above is from class with Toby Stuart and Rob Chandra at Berkeley. The wisdom is theirs so thank them if you bump into them.
Context
Before the first iPhone came out, Skyhook wireless allowed you to tell a location based on wifi access points. This was brand new technology (now in every phone, you know how your phone asks you to enable wifi to make location services more accurate? yes, that’s is this tech). GPS was the standard back then. Skyhook had been trying to woo Nokia for over 60 meetings – still had no customers after 2 years of VC money.
Steve Jobs discovered Skyhook and told the CEO he loved the product. He asked the CEO to send proposal the next week.
What would you do?
(Actually take 1 minute and write down what you’d do before reading on)
Answer
Like most people who are asked to do something by Steve Jobs, you’d likely make a proposal. Maybe you price in a licensing fee or fixed cost or maybe you’d even pay Apple to get the deal. This makes sense. This is exactly what the CEO did.
Steve Jobs answer was roughly “Thanks for your proposal. However, this will cost too much over 2 years. We have decided we will work with Google and develop the technology together. Best of luck.”
Crushing.
A similar context
Rob was on the board of a company which produced chips. Their pitch was that their chips had great processing power on very low power usage, perfect for smartphones as the category was just beginning. They also had no customers when Steve Jobs asked for a proposal.
An alternative answer
Rob replied Steve and said “Thanks but it’s hard to give you a proposal when I’m not sure if we’re the right solution for you. Can we speak to a few of your engineers?”. Steve replied “Fair enough, please talk to my people.” Rob’s team went in and they learned the flows.
A couple of weeks went by and Steve wrote Rob “Hey, I need a proposal from you.” Rob replied “We’ve started off great but we’ve found these 10 issues we need to work through with your team. Let me work through these problems to make sure we’re compatible. Can I send in even more folks so we can work through them with your team?” Steve replied “Sure. go ahead”
A few more weeks went by and this formula was repeated. As you can imagine, Rob’s team was working with Apple’s engineers with their chip inside. Progress was happening and product was moving.
One day, Steve Jobs knocked on Rob’s door. It took Rob by surprise but Rob welcomed Steve into his home. Steve said “I really need a proposal from you.” Rob replied “What’s the most you’ve paid for an acquisition?”. Steve said “I understand what’s happening”. Steve left.
Within 5 days Apple paid the 2nd biggest amount it had ever paid for Rob’s company.
Morale of the story
Build deep hooks
Once Rob’s team was embedded into Apple, the engineering and product team had already made the decision. It would have lowered moral and set timelines back for Steve to come out and say “This isn’t going to happen”. The timelines were tight as they wanted to release the iPhone.
To use an analogy from “Old Man and the Sea” (a novel by Ernest Hemingway – a fishing story), when Steve asked for a proposal, the hook was in the lip. Fisherman know that a big fish can easily yank the hook away. When Rob embedded the team, over time the hook went deeper and deeper into the “fish’s stomach”. The bigger the fish, the deeper the hook needs to go into the fish. Once really deep, then you reel it in and it becomes harder almost difficult for the fish to evade the hook.
Solve for what customer wants (but doesn’t tell you)
Rob didn’t mention this but a meta thought is Rob solved for what the customer wanted. Apple was looking for a chip for its iPhone. It wanted the best tech, and Rob believed they had it. It wasn’t ready and things needed to be fixed to work in the iPhone but Rob’s team solved through that.
We can be doing this at Xendit. When customers ask us for proposals, let’s push away that discussion and focus instead on what their unspoken needs are but truly exist. What is the goal – is it a new market, new customer, get rid of the competition, take more margin? Then how can we sell a tailored solution that actually solves the problem.
This is our version of Henry Ford’s “If I ask people what they want, they’d say a faster horse.” Instead, Henry mass produced the first cars. We should be so close to the customer we understand their real needs and form solutions that can satisfy those.
