Rapidly test and validate any startup idea with the 2-day Foundation Sprint

Jake Knapp:We would have a conversation with founders you're saying like gosh I'm I'm almost embarrassed to ask this question but who exactly is your target customer and three co founders have three different answers

John Zorotsky:After these hundreds of teams that we've worked with we've seen that there's one failure mode which is they don't know what that set of basics are then there's this other failure mode where they never test

Lenny Rachitsky:It let's talk about the foundation sprint walk us through the process how does it start what are the steps

Jake Knapp:At the very beginning of your project we recommend this kind of crazy idea that you clear your calendar so the core team come together for ten hours roughly and go through a sequence of activities so that we can make all of the key decisions together

Lenny Rachitsky:I think a lot of people wonder as they're hearing this is why don't I just build something and launch it and learn

John Zorotsky:One phenomenon we've seen when teams are building things really quickly with AI is that the more AI generated or assisted they are the more generic they tend to turn out put yourself in a situation where you can slow down and do some hard thinking some deep thinking about what's actually gonna make your product unique going fast can actually slow you down in the long run

Lenny Rachitsky:Today my guests are Jake Knapp and John Zorotsky the framework that Jake and John share in this conversation is basically the missing manual for founders and product teams trying to refine and test their startup or product idea it's called the foundation sprint and it emerged out of the famous design sprint which Jake and Jay Z co created and also from working with over 300 teams building both new products at startups also with teams at larger companies like Google Microsoft YouTube Slack Uber and many more they published a book with this framework at the beginning of this year called Click and the excerpt from that book that dives into this framework is one of my most popular post of all time and is one of the rare non AI posts amongst the top post rankings in this conversation make sure to get your pencils out because we go through exactly how to execute this two day sprint where at the end of it you have a very clear hypothesis that your entire team is aligned around that clarifies you're building who you're building for how it differentiates from competitors and how to quickly test it with real potential customers the two days that you invest in a sprint might be the highest ROI days in the history of your product and I highly encourage you to do this if you're in the process of baking an idea if you enjoy this podcast don't forget to subscribe and follow it in your favorite podcasting app or YouTube also if you become an annual subscriber of my newsletter you get a year free of a bunch of amazing products including Bold Linear Superhuman Notion Perplexity Granola and more check it out at Lenny'snewsletter.com and Click bundle with that I bring you Jake Knapp and John Zorotsky this episode is brought to you by Brex the financial stack used by one in every three US venture backed startups Brex knows that nearly 40% of startups fail because they run out of cash so they built a banking experience that focuses on helping founders get more from every dollar it's a stark difference from traditional banking options that leave a startup's cash sitting idle while chipping away at it with fees to help founders protect cash and extend runway Brex combined the best things about checking treasury and FDIC insurance in one powerhouse account you can send and receive money worldwide at lightning speed you can get 20 x the standard FDIC protection through program banks and you can earn industry leading yield from your first dollar while still being able to access your funds anytime to learn more check out Brex at Brex.com/bankingsolutions that's Brex.com/bankingsolutions many of you are building AI products which is why I'm very excited to chat with Brandon Fu founder and CEO of Paragon hey Brandon

Brandon Fu:Hey Lenny thanks for having me

Lenny Rachitsky:So integrations have become a big deal for AI products why is that

Brandon Fu:Integrations are mission critical for AI for two reasons first AI products need contacts from their customers' business data such as Google Drive files messages or CRM records second for AI products to automate work on behalf of users AI agents need to be able to take action across these different third party tools

Lenny Rachitsky:So where does Paragon fit into all this

Brandon Fu:Well these integrations are a pain to build and that's why Paragon provides an embedded platform that enables engineers to ship these product integrations in just days instead of months across every use case from RAG data ingestion to agentic actions

Lenny Rachitsky:And I know from firsthand experience that maintenance is even harder than just building it for the first time

Brandon Fu:Exactly we believe product teams should focus engineering efforts on competitive advantages not integrations that's why companies like You.com AI Twenty One and hundreds of others use Paragon to accelerate their integration strategy

Lenny Rachitsky:If you wanna avoid wasting months of engineering on integrations that your customers need check out Paragon at useparagon.com/lenny

Lenny Rachitsky:Jake and Jay Z thank you so much for being here and welcome to the podcast

Jake Knapp:Hey Lenny thanks for having us yeah thanks so much for having us on again this is always a treat

Lenny Rachitsky:This is gonna be a very tactical conversation we're gonna be going through how to actually execute a foundation sprint and the reason that I'm excited to do this is you guys shared an excerpt from your book where you initially shared this whole concept it's called Click you shared this in my newsletter and I was just looking at it and that excerpt that post is amongst the top 10 most popular post of all time in my newsletter which is especially special because it's not an AI oriented it's one of the few non AI posts that are near the top 10 which just tells me how valuable this is to people and consistently has sat there it hasn't been usurped just continues to climb so I'm really excited to just have a conversation where we share actually how to do this let me just start with the beginning just a little backstory on how the foundation sprint came to be I know it emerged out of the now very famous design sprint you guys also developed so just give us a very brief overview of just how this came to be this idea of this foundation sprint

Jake Knapp:Then after a few years at Google Ventures John and I left and eventually together with our cofounder Eli Bully Goldman we started our own venture firm Character Capital and that's kinda where the story of the foundation sprint comes in

Lenny Rachitsky:Okay awesome JZ anything you wanted to add

John Zorotsky:One of our goals probably our biggest goal for starting our own VC firm was that we wanted to be able to focus on just the kinds of companies and the stage of company building that was the most fun to us but also was where we thought we could have the biggest impact and so for us with our background as designers that is the early days the first couple of months or the first year or two years of building a new business and at GV sometimes we did that but sometimes we were working with companies that were already well established and when we'd come into those companies they kind of knew what they were doing they knew what they stood for they knew how they were different in the market and how they were positioned so and we could help them answer these big questions and solve these problems and test their prototypes with customers but when we started investing in truly pre seed sometimes inception stage pre product pre revenue pre everything companies there was this piece missing at the beginning of that process so we'd run design sprints and they would be helpful but oftentimes it felt like there was a foundational element of that project that we didn't quite have our hands around and it was things like what is the problem you're solving and who's the ideal customer how are you different than what's in the market today who are your actual competitors and there were these questions that just kept coming up again and again that led us to say hey we need to create a new sprint method something that is really targeted for the very beginning of these big new projects and and so that was what led us to create the foundation sprint at Character Capital in 2021 2022

Lenny Rachitsky:Okay yeah I I was wondering the timeline on this what I love about stuff like this like episodes like this is you guys have done so much work and done this so many times with so many companies so many founders and have learned what works and doesn't work you said hundreds of founders hundreds of startups yeah and you've just spent so many hours studying this refining it crafting it and now you're just here to share all the answers save us so much time just like the ROI on this is incredible for us so I appreciate you guys doing this let's get into it let's talk about the foundation sprint walk us through the process how does it start what are the steps

Jake Knapp:So specifically what we talk about with the foundation sprint is it's the very beginning of your project we recommend this kinda crazy idea that you clear your scale schedule you clear your calendar so the core team this is the cofounders if it's a startup if it's a product team inside a larger organization it's the you know it's the whoever's in charge of product it's whoever's in charge of engineering it's whoever's in charge of design it's whoever's in charge of marketing it's the core leadership team they're gonna come together for it's gonna be ten hours roughly give or take and during those ten hours we're gonna go through a sequence of activities very highly scripted sequence of activities so that we can make all of the key decisions together and identify the basics of the project what's what's gonna differentiate us in the marketplace and what's the best approach or implementation path all of those together form a hypothesis and then we recommend so you finish now that's your foundation sprint you've got your founding hypothesis once you've got that founding hypothesis then you're gonna go and do design sprints and we recommend you clear the calendar for two to three weeks at least so you have the chance to be wrong about your hypothesis and we're gonna run experiments and again the design sprint highly scripted calendar clear you know emails off we're just the slack is off we're just focused on running through these sequence of decisions building prototypes getting them in front of customers learning about a scorecard that relates back to the founding hypothesis so at the big picture it's it's gonna be anywhere from ten hours to you know three to four weeks you're gonna run this detailed script of activities with your team with their calendars clear and that's crazy and most people won't do it but if you do it it confers upon you a huge advantage because now you're you're you've got information you you know whether or not your product clicks with customers and that's a we've seen that be just such a tremendous signal for is there gonna be product market fit

Lenny Rachitsky:Okay that was really helpful the ten hours is that specifically that's the foundation sprint time box

Jake Knapp:That's the foundation sprint okay time box yeah and it's it's give or take right it might you might go fast and be done in in eight you might have a lot of conversations and have a slightly larger team and might take you twelve so we like to spread it out over two days do two you know like four to six hour blocks

Lenny Rachitsky:Okay and then the three to four weeks ish that's including the design sprint

Jake Knapp:That's the design sprint yes okay one week sprint awesome

Lenny Rachitsky:Okay this is incredible ROI on ten hours of work basically over two days get to have a much stronger sense of whether your idea is any good and you can tell yeah is that a simple way to describe it like you just supercharge validating an idea exactly

Jake Knapp:Yeah it's it's a it's a chance to in the in the ten hours it's a chance to get clarity about the core of your strategy which is something that teams will often go months without really nailing down and the the three to four weeks that's a chance to run experiments and get confidence you're you're actually building the right thing

Lenny Rachitsky:Okay let's talk about these two days how does how do you lay it out how do you approach it what should someone do if they wanna actually try this at home

Jake Knapp:So there are three phases to the foundation sprint first phase is basics second phase is differentiation and the third phase is the approach to the project so again all three of those are gonna come together to create the founding hypothesis so the first phase the basics as i mentioned that's identifying who's your customer what problem are you solving for the customer what's the competition for solving that problem how do they solve it today and what are the alternatives how how else do people solve this what are the workarounds those are really almost embarrassingly simple things to answer but when we do this with a team and everybody's answering you know sort of proposing their answer to each question we see everybody's got a different perspective and then when we lock in the decision maker on the team says okay it's gonna be this one it's gonna be this one it's gonna be this one now we have clarity and and confidence that that's the right way to go so we'll move forward from the basics into differentiation and identify what are the things that can set us apart from those competitors and we're gonna use the advantages we have we're gonna use our our insight we're gonna use our motivation we're gonna use our special capabilities these are things again people are aware of these things they're in tune to it but we wanna get super super specific and i'll i will go into an example in a second and i think that'll make it more clear exactly what we mean but going then from differentiation to saying what are all of the different implementation paths we could take here let's identify what those are put a little detail behind them and then we have a structured path for people to take so they can weigh that decision but move through really quickly commit to one have a backup plan in case you end up feeling like you need to pivot once you start sprinting on it and all of that together is gonna form this this kind of mad libs sentence if we solve this problem for this customer with this approach we think they're gonna choose it over the competitors because of differentiator one and differentiator two and it's it's almost silly how simple this thing is but really powerful if founders to have that that clarity about okay here it all is in one sentence now let's go let's go test and make sure this is true

Lenny Rachitsky:Amazing let's look at an example that's a really good idea i know you brought some some examples you're gonna do some screen sharing you're gonna pull it up if you're watching on youtube you'll be able to see it also if you're watching on spotify you can see the video if you're an apple sorry mold but do your best to describe what we're gonna be looking at

Jake Knapp:Yeah so we're gonna talk about this company called latchet first this is the first company we'll talk about and latchet is a startup who was in our last group of character labs and we can go into to character labs later on but essentially this is a kind of an accelerator like program that we run at character capital where we invest in a group of companies at the same time and we run them through that process that we were just describing where we start with a foundation sprint and then it's gonna be a sequence of three design sprints after that so that they're they're testing and refining that hypothesis and so it's a great time for them these are founders who have just started their companies they're kind of you know that pre seed very beginning zero stage and the the progress you can see in those three and a half four weeks it's phenomenal so let's let's talk about latchet so latchet a couple cofounders chris and james who were they had left substack they were engineers leading up the growth team at substack and they wanted to build a product for for artisans so if you imagine like you're a you're a jewelry maker you're a you know you're a painter you're a woodworker and you wanna sell your products outside of your immediate you know community the physical place where you are your physical location well you can you know you can build a site on shopify but you still have to market it if you do that you gotta figure out how to reach those folks you can put your products on etsy but etsy has become quite commoditized so you're gonna be up against everybody everywhere and it's gonna be very hard for you to build an identity there like to build a sense of who i am what i'm all about and so what chris and james thought was you know maybe we could use some of the the techniques and methods we we used at substack to help people find other you know other newsletter writers through their community through recommendations they make and and help help out artisans in that way would wouldn't that be cool so they were kind of at that stage they had a few different ideas about what form that might take what that might look like when they joined character labs and so that's kind

John Zorotsky:Of the the backdrop to to this little quick story i'll tell and there's one really important thing to emphasize about chris and james that jake mentioned briefly but i think is is worth repeating is that they're engineers they are builders their instinct is to write code it's to build software and they actually told us that they were excited but nervous to come into character labs where we would be encouraging them not to write code right away to take this time to clarify the differentiation the the structure of what they're building and to validate that with customers before they went all in on building a particular approach and i think you'll see in this example how while they were a little hesitant to do that upfront eventually they saw how much more valuable it was to work in this way versus just diving right into building something

Lenny Rachitsky:That's actually really helpful context and i speaking of the substack recommendations feature was one of the most game changing features for me with my newsletter so because it basically supercharged my growth so i get why they'd be so excited about bringing this learning to other to other ideas into their own startup so thank you guys for doing that and yeah i'm even more excited to see what they're building

Jake Knapp:Well let's take a look so the this board here that we're looking at this is like their miro board so we've got like a big template and whether you're watching on youtube or listening to this episode we'll we'll talk about at the end how you can get access to this template which will kinda guide you through the process but what happens in this first step in the foundation sprint in the basics as you said before is that we're going through a sequence of questions who's the most important customer for example is the first question the very first question that a team needs to answer and and as we do that just as an important side note we're using this tactic that we call work alone together and specifically the note and vote is this method where everyone's in silence you know in this case both chris and james but if you have a team of seven it's gonna be all seven people be working in silence writing down their own answers to this question who's the most important customer who are all the different kind of customers we might consider writing down multiple answers and then once we've got those answers the team's gonna vote on those and then one person who's designated as the decider usually it's gonna be the ceo of the startup but it could be some cases maybe it's the the you know chief product officer or whatever however they decide to do it but one person's gonna say okay this is our decision for now and now we're gonna move on and by doing this and using silence and using structure and then having a designated decision making process we can move through a lot of conversations very quickly and save some of that energy that it requires to make decisions for the decisions that matter most in this case what we're really worried about on day one of our foundation sprint is differentiation so we don't wanna spend too long on the basics anyway we motor through customer problem the capability the insight the motivation that the team has those are all advantages and who are the competition and we get this this sort of one page sheet the basics and it's gonna have the answers to all those questions who's our customer in this case artisans who wanna sell online but they sort of find tech and marketing to be hard the problem is sales growth you know if we if we jump down to the competition their number one competitor is shopify but etsy is another way people approach this as we mentioned but there's also you know in person sales and art fairs there are other ways that people try to get at this problem and realistically if you're delivering a solution you you need to stand out from all of those and then there's their advantages we talked about you know this this key one they built substack's network growth features so they know how to do this thing so now that we've established the basics we're gonna move on to differentiation

Lenny Rachitsky:Before you do that actually let me ask you a question here because i think people seeing this could think oh this is like know all this stuff so obvious it's like okay i get it i have an idea i don't need to do this where do you find people most often surprised by something that emerges out of this is like one of these buckets often wow we this is often not what you expected or is it generally a lot of surprises what do you what do experience there

Jake Knapp:I think the moment where you immediately start to see value is when everyone on the team is writing down their answers to these questions and then people put their heads up and look at what everyone else has written and they realize oh that's not what i woulda that's not what i said or i didn't think of that one or you know gosh the actual concrete reality of going through with the team and and being very transparent and clear about how we're making decisions too about each of these things when that basic sheet comes together and you see the specifics the specifics are surprising but it's also familiar we look at it and say yeah that looks now it looks right but i'm surprised by the specifics they're not what i would have written if i had written it down i might have gotten two of those things two of the you know six items on there and i think that's what's that's what's most surprising it's and i think it's also kind of a sense of relief that like okay well that's very reassuring that we have we have clarity about that and we've made it concrete

John Zorotsky:These activities that we do during the basics are impactful for different reasons i think that problem can be really interesting because when teams sit down and think about it it is often less clear than they thought that what the actual problem is like wait what problem do our customers really have that we're solving for them i think competition can be sort of an moment when they start to think beyond just oh what are the other startups in this space like if this is an important problem your customer's probably already solving it somehow it may be a workaround it may be an alternative it may not be a direct competitor but if it's worth solving they probably have some way of dealing with it today and what is that and when you zoom out and you look at that set of competitors it can be a little scary but it is also an important moment for teams and then i think that advantage isn't necessarily immediately beneficial but it becomes really valuable when the teams are looking at differentiation because startups can't compete with big companies on scale or on having built in distribution advantages or having partnerships in place so they really have to dig deep and figure out what can we do that nobody else is capable of doing and so by taking time to sit down and do this almost unnatural act of like wait why are we special and when we're able to encourage teams to really think about that it sets them up really nicely for the next step which is differentiation ideally based on those advantages

Lenny Rachitsky:What i'm hearing is a lot of the value here is also just everyone has what the answers in their head in some way but just seeing what everyone else is thinking and then aligning on one is is a lot of this value

John Zorotsky:Yeah it's like thinking deeply and quietly about it yourself and then seeing what everybody else comes up with when they are able to also think deeply and quietly about it and then ideally if they're working with us in character labs having somebody who's a bit external to push them and say try harder like dig deeper like what really makes you special here how are you really gonna beat OpenAI how are you really gonna beat Google at this.

Lenny Rachitsky:This whole idea of noting and voting and working in silence such a recurring theme on this podcast of not doing brainstorms in large groups a lot of you like it feels like that's just dead in every way I just had this naming expert on the podcast who names names some of the biggest companies in the world Pentium Powerbook Sonos or Sell and that's their approach is they they used to do brainstorms he's like that doesn't work and now they just have small teams sitting quietly in a room working together on on ideas and then thinking on their own so that's such an interesting trend yeah and I feel like IDEO just like created this whole we need to brainstorm post its and then everyone's like that's not actually working let's stop doing that and the other thing that I feel as you're talking through this like what I'm feeling this is there's for founders there's not like a manual for starting a company you always have it feels like this dark art of like I guess I gotta find product market fit on this idea feels like this is almost a manual of everything you need to do to just get the basics of is this even worth doing.

John Zorotsky:Yeah and that's why we created it because we still are investing in founders who are incredibly talented and they're smart and they have a background that is going to give them an advantage in building some particular product but you're right there's no manual and we were just kind of solving our own problem we believe in this so much and we see the ROI as being so great that this is the first thing we do when we make an investment we invest in a company and then we run a foundation sprint with them right away we run more foundation sprints with startups than we do design sprints at this point and I don't think we can ever encapsulate every single thing that you need to know or that you need to do to start a company but this is our best take at what you should do in the early days to set yourself up for success and maximize the chances that you're gonna reach product market fit.

Jake Knapp:So we've done the basics and another important thing that we've accomplished while going through the sequence of activities in the basics is to boot up the right context into everyone's head so that we're ready for the main event of this first day which is differentiation and I still have very firmly in my mind like I grew up with a Mac Plus computer and you'd put in you know the disk and the drive and you'd have to you'd have to boot up the the app that you wanted to run that that's kind of the way our brains work like we have limited working memory and we've gotta have the right stuff in there when we're when we're gonna make a big decision when we're gonna think hard about a certain problem or question it's important to have the right context fresh at hand so the basics is really the context for thinking about differentiation and differentiation is the heart of what we're doing in the foundation sprint because it's it goes without saying perhaps but we like to say it when you are making a new product people want to ignore it people want to not pay attention to it and if they do have to pay attention to it if it gets in their face they they wanna not try it because we just are all bombarded by so many things and that's never been more true than it is now and so we have defenses up to save to save calories in our brain we just we don't wanna engage it's crucial then that a product has a clear promise that it makes and that that promise is is radically differentiated from the alternatives and that that promise is strong enough that you'll try it and then that the product delivers on that promise and so what when we talk about differentiation we're saying look we want you to be really clear on your promise not the promise you're making to investors about this technology and what's special about the technology or what's special about the market opportunity but with the customer at the center we've started the basics by talking about the customer and the problem they have and the the way they see the world and we wanna talk about what you're gonna offer to the customer and how it's gonna separate from the alternatives and so in the end of this next phase of the foundation sprint we're gonna have a a two by two diagram that's gonna look like a business school one zero one diagram and in fact we often refer back to this Steve Jobs iPhone introduction slide where he talks about the the iPhone and he makes a joke about it this is a business school one zero one diagram but it's really helpful to start developing your product with this clarity about this is the promise we'll make to customers at the end and we're gonna deliver on that promise because we can test and prove that in design sprints so anyway we start off we talk about differentiators and we talk about classic differentiators fast to slow smart to not so smart to borrow from the iPhone slide easy to use to hard to use and so on and we just start off and have the team okay let's just let's just score those up against the competition put a sticky note on those continuum showing where you think the product could be and usually you'll do this and maybe you'll start to see well there are a couple places where we can stand out on these classics that's great these classics are easily understandable by any you know any customer we're all sort of familiar with these kinds of things so okay that's great then we get into writing custom differentiators so we're gonna write a bunch of you know good things on one end crummy opposite on the other end and then we're gonna score those and so for the latchit story we'll pick up with with Chris and James here you know they've written well we we could be really we could really differentiate on networked versus siloed our approach is networked if you're using Shopify you're you're siloed right or or we you know maybe maybe we can differentiate on painless business growth versus labor intensive business growth so that might be the specific way we describe the promise of our product so after evaluating a bunch of these writing a bunch of these voting on them quietly you know and then the decider's gonna say alright I wanna choose a couple of these we're gonna try them out the teams are gonna if you're running a foundation sprint you're gonna try out a few differentiators you're gonna score against your competitors you're gonna create a scale and you're gonna say okay let's be honest let's be tough where do we really think we could stack up against the competitors on this differentiator we've chosen in great detail plotting each each company or product one at a time okay so you know you do that for one differentiator you do it for another you do it until you feel like we've got two that are really strong and then you make that business school one zero one diagram and so you know here's here's this one for it says lyric they changed their name to latchet I'm gonna edit that real time.

Lenny Rachitsky:I love this.

Jake Knapp:That's real time change rebrand so yeah so latchet's you know up here in the top right corner and we say okay look this is a good differentiation chart because you've got this quadrant here this quadrant here this quadrant here right you've got the so you're in the top right.

Lenny Rachitsky:And you've in the top right you've always gotta be in the top right always have to be top right.

Jake Knapp:Have to in the top right and if you see those other three quadrants the the top left the bottom left the bottom right those form an L shape and we call that Loserville so we wanna we wanna have like a way of looking at the world that puts all of the competitors into Loserville and then we wanna say like okay if you can deliver on that and if that promise is compelling to customers so both those things have to be true can you deliver on it and do customers care and believe that that that matters to them if both of those things are true you have a really compelling promise you have the possibility of a a very successful product so now we've identified that and that's that becomes a core of our hypothesis can we is that differentiation true so that's the differentiation step.

Lenny Rachitsky:Before you move on to the next step is that where you're going next just so I could take.

Jake Knapp:A yeah.

Lenny Rachitsky:Yeah okay follow a couple threads this is so awesome there's so many there's just so much value here also just the slide at the end here folks are watching YouTube this is like your deck slide right where you show.

Lenny Rachitsky:Your your competitors and how you're you're better than them all.

John Zorotsky:Yeah.

Jake Knapp:Yeah and actually I wanna jump on that for a second because we've all seen two by two diagram right there's a ton of these they're they're all over the place and if you're anything like me I just ignored these I just thought these were pretty much BS up until like well whenever we started putting these foundations for us three or four years ago and I think the reason why usually these two by two diagrams feel like this is just consultant baloney this is just like who you already know it's because know maybe one person makes this chart and they do it quickly because they need it to slide for the slide deck and the audience they're considering maybe it's investors and so you know often these describe technology or they describe the market opportunity they don't talk about the customer's perspective and the other thing is that they're they're not proven there's no evidence behind the fact that these are these true so if they are if they did happen to be about customer perspective it's unlikely that the whole team would have weighed in on on what those differentiators are and it's very unlikely that we would have tested and proven that that that that matters and that we can deliver on it and so if you do all of those things and you do it at the beginning of the project we think this has the potential when we've seen it it's it becomes this well this guiding light here's the north star we need to deliver on this this is what we have to create and that helps you make decisions all the way through your product development cycle

Lenny Rachitsky:Just to point people to justification for why differentiation is so important there's a couple episodes that I did that I'll point to in the show notes that just give you more context of why you need to differentiate so I spoke of David Plasic who is this naming expert that we just had on the podcast he his whole thing is when he's coming up with a name for his like Sonos or Vercel or Windsor it's different it has to differentiate and he talks about this in-depth I'll point to that episode and this is just like if you're not convinced are spending so much time on differentiation also April Dunford who's like the I don't know the god of positioning she has differentiation is such a core part of her approach to positioning and so there's just like so much evidence to tell you that differentiation is a really important step and element of successful yeah

Jake Knapp:One of the things that I've noticed about these topics that these the basics we talked about already differentiation this notion of you need a foundation for your project it's a bit more under the radar for people I think it's a bit harder for people to immediately see like oh we need this we see the people who react the strongest to this and have the strongest like immediate affinity to this idea actually being you know startup founders people who are really sophisticated like in this challenge product managers who are at you know we're invited in to speak at OpenAI and Anthropic about this and we see the product people they're being like oh my god this is really powerful this is the kind of stuff we need I think for a lot of folks though it can sound like oh this is just elementary differentiation of course we need to differentiate the problem is that all of this stuff gets backgrounded it's it's something we we've thought about a bit we assume we're on the same page we assume we're gonna deliver something but then kinda business as usual happens we build a product we get kind of more interested in the technology and delivering that and we end up trying to sell it to customers at the end we end up putting a coat of paint on it with a marketing page or sales deck we haven't actually built from the beginning the thing that we know is gonna matter to people

Lenny Rachitsky:One of the most useful steps here that I haven't seen before is just a starting place for how to even start thinking about differentiation like everyone's always probably thinking price and speed maybe you guys have a really cool just starting list that you showed here anything more you can add here for helping people start to think about ways to differentiate beyond the obvious price and speed and I don't know couple more

Jake Knapp:So I'm just gonna jump into another startup here just so we can see what this sheet looks like with scores on it so this is a startup called Mellow anyway the standard classic differentiators where we start they are fast to slow smart to not so smart easy to use to hard to use free to expensive focused to one size fits all simple to complicated and integrated to siloed and so you know there you could probably argue there's these others that should be included or some of those should be taken off but what we like about this is that it's a small set they're easy to understand we know customers can understand these and they create a great starting place for your team to think about differentiation because you can quickly look at this list and start scoring where you think your product could be on these scales and you know that if you can use one of these people will understand it but it also starts to make the team comfortable with this notion of differentiation and we wanna make differentiation something that all of the cofounders or all of the core team can participate in it's not just the job of the person writing the pitch deck it's not just the job of the marketer or the salesperson but we're getting everybody's perspective in on it and this is a great warm up activity before we start to write our own custom differentiators

Lenny Rachitsky:Awesome and then again this is just inspiration for coming up with more ways to differentiate something that is a common question I think for founders is price as a differentiator is there any insight you guys have there like how often do you land on price being a good differentiator with the startups you work with

John Zorotsky:I think price is rarely the the most important differentiator part of what's interesting about going through these classic differentiators these standard ones first and then jumping into the custom ones is that the classic ones are sort of universal but it is gonna be hard to beat the competition on very many of these it's gonna be hard to build a product that's faster than what Google can build or what OpenAI can build it's going to be harder to be cheaper than those competitors because they just have so many more resources they can have loss leader products that are underpriced where I think pricing has become a really clear advantage for some companies is those that are leveraging AI to solve problems that were previously unsolvable with software so we have a company that we invested in called Bindwell and they use AI to design precision pesticides and we ran a foundation sprint with them right after investing and five years ago you couldn't design pesticides with AI it wasn't possible even if you had that idea you wouldn't have been able to build it and now you can and so for them of the big advantages is yeah these pesticides they can be a lot cheaper because it doesn't require this massive team of R and D chemists to tinker and experiment with things in the lab to try to create new pesticides we can design them with AI so it is it is more often true in AI companies like that but it's very difficult to to compete on price in general and we think we find that it is not as it's not as durable of an advantage as some of these other things

Lenny Rachitsky:Especially with how to design your price with customers as you're starting a company also the episode with the founder of Superhuman Rahul he actually spent there's a lot of cool context on how he differentiated Superhuman and it was actually very much on speed and his speed actually yeah speed was where he landed and to your point it was both it was the Venn diagram of what you said can we do this and do people value it and that's where his research pointed to is people really value this and they were able

John Zorotsky:Oh great.

Jake Knapp:To achieve it one of the things that's really interesting about this example here that we're looking at Mello is that you can see that they were not the best on all these scales teams are going through and they're being really realistic about how they stack up against the competition it's normal and natural to find that you're not gonna be the best on all these differentiators and that is really helpful for creating clarity in your positioning and in your marketing because you're not gonna show a featured checklist chart that says you're better at everything than every competitor but if you can drive home one or two things that your customers really care about and that you can be radically better at it's gonna improve your chances of winning and finding product market fit and we find that going through this process where you're not just thinking about one differentiator at a time or you're not trying to win on all of them you're looking across the scale of options and you're being just really honest about where you stack up can both point you in the right direction in terms of what you will win on but also can give you the comfort to say hey it's okay if we're not better than every single company on every single one of these things

Lenny Rachitsky:That's great context that's gonna make people feel a lot better I think today's episode is brought to you by Coda I personally use Coda every single day to manage my podcast and also to manage my community it's where I put the questions that I plan to ask every guest that's coming on the podcast it's where I put my community resources it's how I manage my workflows here's how Coda can help you imagine starting a project at work and your vision is clear you know exactly who's doing what and where to find the data that you need to do your part in fact you don't have to waste time searching for anything because everything your team needs from project trackers and OKRs to documents and spreadsheets lives in one tab all in Coda with Coda's collaborative all in one workspace you get the flexibility of docs the structure of spreadsheets the power of applications and the intelligence of AI all in one easy to organize tab like I mentioned earlier I use Coda every single day and more than 50,000 teams trust Coda to keep them more aligned and focused if you're a startup team looking to increase alignment and agility Coda can help you move from planning to execution in record time to try it for yourself go to coda.i0/lenny today and get six months free of the team plan for startups that's c0da.i0/lenny to get started for free and get six months of the team plan coda.i0/lenny anything else on differentiation before we move on to the third step of designing your approach

Jake Knapp:I think it's worth taking a look at what it looks like when you have a bunch of sort of these custom crafted differentiators what that might look like because in the case of Mello we've got I don't know there must be 25 here and you know so they've written purposeful magical clear personal provides direction flexible human creative beautiful all kind and on and on what they're trying to get at and what we want every team to sort of think about here is what is a new version of reality a new lens that you can offer to your customers on the world because a lot of times you're building a new product you actually have to change the way people think about what's possible and what matters to them those classics are often already well trodden ground where other people have differentiated they've already thought about it but these these new particular things that you know are are possible with your technology that you know is possible with the customer problem the things that you believe might matter it's really interesting to try some very fine tuned list of slight sometimes just a slight variation we we'd slightly change this wording or the way we describe what's great about what we do and that is the thing we think is really gonna stand out and again you can see even on this list that they've custom written when we see where they score it they're not all the way to the good end of the scale on all of them you know when they get honest and look through they're like well actually you know maybe we can't deliver on this but this one we really can and this one we also suspect will matter to customers

Lenny Rachitsky:Where did Mello land on the differentiators they picked and where did Latchet land?

Jake Knapp:Yeah let's take a look for Mello they tried out a bunch before they decided here so they actually scored with the competitors on these scales

John Zorotsky:And just for context Mello is a tool that allows you to run very simple very targeted very useful AI agents for common everyday tasks like summarizing your email useful or cleaning up your calendar or drafting responses to messages and one of their insights was that there's been so many AI products that have over promised about being able to replace all humans and do anything and 10x your productivity but so few of them have actually delivered on those promises and so they have this insight that if they can be really focused and really human and really high quality they can deliver on that promise of making your life better by offloading tedious tasks that that's gonna really click with with customers

Lenny Rachitsky:That's a great context thank you for adding that.

Jake Knapp:So Mello lands on mobile first and works out of the box as there are two differentiators and they're trying to differentiate from you know Gumloop and OpenAI as sort of a generalized tool and Latchet they're gonna differentiate on

Lenny Rachitsky:Now you're pulling it up if folks aren't watching he's pulling up the Miro board to show us where they landed.

Jake Knapp:Latchet they're gonna differentiate on helps you grow and cooperative so when they compare against Etsy when they compare against Shopify or setting up your table at an art fair they're gonna differentiate on helps you grow and cooperative and they think none of the competitors does both of those things well.

Lenny Rachitsky:That is cool thank you for sharing that and to your point the this is where they think it will work and then the next step is actually test this in the market which is where we go from here so let's move on to the next step and which is the final step of the foundation sprint

Jake Knapp:Yeah so closing off differentiation is a short step that is just to create some project principles that'll help you make decisions in line with that differentiation and you know you're just talking about Superhuman and differentiating on speed and when John and I worked at Google back in the February there was this list called 10 things we found to be true and one of the things on that list was fast is better than slow and what was interesting is this is a mantra that you would actually hear people using in meetings to help dictate decisions you know well we're considering this approach to this view or this approach this approach renders you know twelve milliseconds faster that's probably gonna be the one we're gonna take because it's gonna be a really compelling reason for us to not go with just the one that renders faster or the one that gets the user to their benefit with one less click and this notion that you can have a a decision making guide we think it we've seen it be so useful for for us in those contexts we think hey this is an easy moment you've got your differentiators kinda loaded up in your mind let's take a second here and just think what's a principle how can we turn that into a principle so if we take a look at Latchet you know they've got help sellers help each other so if they're trying to make a decision between two approaches well which one of these help sellers help each other or do the thing that makes sellers more money if we're choosing between two things let's do the one that helps make them more money and so we we then have we've kind of moved on we've got a mini manifesto we call it which is that differentiation chart and these principles and the notion is this page the the basics page was just kind of the core simple stuff you need to know about this project the mini manifesto in one page is your decision making guide

Lenny Rachitsky:This is so cool and this looks like it would take a lot of work but again this is just day or two of sitting around working through this framework

Jake Knapp:Yeah you'll get to this in you know four ish hours with your okay

Lenny Rachitsky:By the end of the first day you'll have a mini manifesto that describes how you win essentially as a company and a startup

Jake Knapp:Yeah or how you believe it's gonna work and of course

Jake Knapp:Test it yeah now the next phase of the foundation sprint is is locking in on the approach we're gonna start with so we'll continue the story of Latchet here to it's easier to use an example than to describe this in the abstract so coming into character labs Latchet had sort of four approaches in mind but they weren't sure which one to take so they might build an app that's one approach they could take they might build a sort of a newsletter platform that's something obviously they knew how to do they might build a Shopify plugin that's a simple way to kinda piggyback on something people are already doing they're right their number one competitor is Shopify or they might have to build the full stack and I think a big question for them was which of these and how much do we have to build before there's enough value for customers that they're actually gonna adopt it

John Zorotsky:We're gonna

John Zorotsky:And we're actually gonna get some traction and get this thing going and it's important to call out here that all four of these approaches solve the same problem for the same customer and they are all likely to differentiate from the competition in the same ways based on the unique advantages that the founders Chris and James bring to this company so these are not like wildly different product ideas or company ideas these are just different approaches you have the same destination in mind but you say hey which path can we take it's like pulling up directions on Google Maps this one's a little faster this one uses less fuel this one avoids tolls what's the right approach for us to take

Lenny Rachitsky:And I love that the what you the work you did on that first day eliminates a lot of ideas you probably had that you would have probably spent time building and then realizing okay this doesn't make any sense it's just like what everyone else has

Jake Knapp:Totally totally yeah and we usually see teams starting projects in one of two states and one state is the state that Latchet finds themselves in where gosh there's a few different ways we could do this how do we decide we can discuss and discuss and discuss but you know that could go on forever so that's state one we we know there are some options and state two is we're pretty locked in on one approach already we we think we've got this figured out in either of those cases we think it's worth taking again like about you know four to be really careful to lay out the options if you think there's only one option to sort of force yourself to think well what if this doesn't work what's another alternative or is there another alternative that we have previously considered and dismissed that we should maybe reconsider just to make sure and end with a situation where you've made a decision clearly about okay we've considered alternatives this is our first choice and you've also identified this is our backup plan so that failure doesn't seem quite so scary when we start to run experiments and we're really able to to pivot fast if should that happen so what we're gonna do on the second day of the foundation sprint through this sort of third phase which is the approach is to identify those different paths so for Latchet here they've got a b c and d options we're gonna color code those and then we're gonna plot them on these charts so we've got these different lenses we call this activity magic lenses and the notion is if we had a discussion about it and we could as investors if we could imagine like waving a magic wand and putting the perfect team of advisers in place to counsel the founders on this decision we would love for them to have a customer expert somebody who's just you know brilliant vision for the product and the customer experience and they're you know hammering their fist on the table saying the customer the customer the customer make the decision that's best for the customer and so we'll plot those options on these axes of easy to use versus hard to use and perfect solution to the customer problem versus you know this is just an okay solution to the customer problem and then similarly we want some an adviser who's gonna pound their fist on the table for building something cheap and fast getting it out into the market being pragmatic get it out there as fast as possible that's the pragmatic lens we want somebody who's gonna advocate for growth what's the way to reach the most customers get it in people's hands as fast as possible easy to adopt we want somebody who's gonna advocate for for money for the financial health of the business so what's gonna create long term value for the customers where's where's their biggest audience of these folks we wanna look at differentiation which we spent you know the first half of the foundation sprint establishing well we wanna consider these approaches through that lens as well and so what the teams will do is to plot these options on these lenses they'll almost always create some lenses of their own some custom lenses that matter to them you know they might have one about their conviction I think there's an there's sort of a humorous one for Mello where it's like which you know founder is like f yeah that's exactly what I wanted what I wanna build and on the other end of the spectrum it's like nah just kinda the sort of heat of excitement that you feel that might be a really important decision point

Lenny Rachitsky:That feels really important like that feels like that should be one of your you call these the magic lenses

Jake Knapp:Yeah yeah it probably should be it probably should

Lenny Rachitsky:Excited are you to build this that feels like a really important piece

John Zorotsky:If we add it we can call it the Lenny lens.

Jake Knapp:The Lenny lens yeah uh-huh that's a good idea yeah so yeah so here it is and you can see that Maria is more likely to swear than than Ben apparently but that it's it's crucial right and many founders they'll have different one of the challenges is that for each founder I think each set of founders there's maybe a different way that they phrase what that means what conviction means to them and sometimes and maybe it's as simple as this it's just I just feel it I just know and sometimes it's a little bit more like well I you know it's it's a it's conviction but it's also what's the data that we have behind it and and that's what forms my my intuition about it.

Lenny Rachitsky:Awesome I I I love that lens I love that you asterisk out so it's not a little bit.

Jake Knapp:A little bit little little just slightly concealed slightly that's the the part yeah if you zoom in it's it's actually not censored so the cool thing about this Lindsay's thing is at the end you've done all that you've plotted it all out and if you're having a conversation like that you just have to sort of maintain in memory what did that person say what did that other person say it was that conversation I had you know a week ago whatever here it's all laid out and sometimes you zoom out and it's honestly as simple as like oh hey look you know the the blue one is in the top right quadrant of almost every single lens like what what is that one what's going on that might just be an easy decision sometimes you zoom out and you say oh clearly like nothing wins in every lens and that's actually really reassuring because then you know there is no perfect decision there's nothing that checks all the boxes and that's gonna help us decide because now we decide which is the most important lens which is the most important viewpoint to take and you can you can actually move forward in either either way either situation you get in where there's sort of consistency across all the lenses or there's not you either pick a lens or you just pick the the consensus winner.

Lenny Rachitsky:I love that this step answers a question that's been in the back of my mind that I think a lot of people wonder as they're hearing this is just why don't I just build something and launch it and learn and like why am I spending all this time sitting in a room and this is and this to me is a big part of the answers just like spending an hour or two thinking through here's the ideas we have how do they compare on the how do they look on these magical lenses which makes so much sense like how do they just filter on what customers will love most will help us grow the fastest will drive the most money things like that like it's such a simple exercise that will save you so much time building and launching and having to spend time learning like that is weeks days months of work versus a couple hours could save you so much of that time.

Jake Knapp:And it's also the case that you start building something it's exciting you can move fast it's easy to easier and easier to see progress now with AI tools and that act of building and starting to create something has a momentum of its own that can be hard to stop and if you're headed in the wrong direction you can spend a lot of time building and making progress but it's just if it's not progress in the right direction it's it's actually hurting you and that's why we we want people to pause and and take this it's really as you said earlier the ROI is high but it feels very unnatural to pause when you're so excited at the beginning and ready to go to pause and say okay let's make sure we're taking the right path but you know you just imagine you're you know you're Gandalf you're Frodo you're starting off you're trying to get to Mordor it's a long trip you don't wanna take the wrong path you wanna take the you know think before you start marching through you know the the the swamps or whatever.

John Zorotsky:One phenomenon we've seen when teams are building things really quickly with AI is that the more AI generated or assisted they are the more generic they tend to turn out which makes sense if you think about how LLMs were developed they're all basically trained on the same data and so in this excitement and this rush to say wow look at how fast we can build it you actually end up with something that is less differentiated than what already exists in the world and then let's say you launch it and that takes longer than building sort of a clickable prototype but you launch it because you're moving so fast and then you get data from the people who managed to find that thing about what they did with it but you don't get any data about what they didn't do with it and you certainly don't get any data about the people who never found it who never tried it maybe they landed on your website and they're like blah another generic AI generated thing that's not worth my time and so we think it's really helpful to basically put yourself in a situation where you can slow down a little bit and do some hard thinking some deep thinking about what's actually going to make your product unique and then you can switch into this mode of like okay great now let's go as fast as possible and get that out into customers' hands but if you don't take this step first it's actually kind of counterintuitive that going fast can actually slow you down in the long run.

Lenny Rachitsky:Yeah to build on that I had this guest recently Bob Baxley yeah knows Bob okay so he has this really interesting insight I think he calls it the primal mark essentially his feedback is wait as long as possible to start any sort of sketch or prototype because as soon as you start drawing what you're building it now everything you do will be a response to that and so the more time you can spend before starting to concept out the solution the more likely you are to land on something that works.

John Zorotsky:Yeah that is super interesting and you know it's it is counterintuitive yeah and I find myself challenged to think about it in the context of the sprints that we run with founders but I think one way to interpret that in the work that we do is that we used to just run design sprints with every team that was our hammer and everything looked like a nail and part of what we found so valuable about doing the foundation sprint is that it it keeps you away from ideation for just a little bit longer and it it forces you to think about you know why you're unique and the market that you're going into before you get to that moment of creating something that looks realistic and then maybe being a little bit locked into that approach.

Lenny Rachitsky:That's such a I love that this emerged out of that like you guys are so design sprint oriented and it's just like cool let's just make prototype let's design let's make it real let's show people and that's like I think where a lot of people's minds are at more and more or maybe as a result and then this is almost like okay maybe that wasn't the right approach to start maybe it's actually better to think a little bit of what we want to design and build before so just the fact that you guys spent so much of your life and time on that and then realize this is actually potentially even more important to do it says a lot.

John Zorotsky:Well and ideas always get distilled down to like one thing that people grab onto and they focus on and I think with the design sprint it got distilled down to just build a prototype just quit messing around and build something but the reality is when you run a design sprint it's five days and you don't build the prototype until the fourth day so you do a bunch of work to figure out how does our customer learn about this thing what are the different ideas that we're bringing to what our solution could look like which of those are the most likely to work and only then at the end of the week are you building a prototype but I do think that as that method has become really widely known people just think about the let's build something and then once you multiply that times the power of AI it definitely creates this narrative that the only way to build something new is to just create the product as quickly as possible and that doesn't really match our experience that doesn't really kind of fit the pattern of what we've seen working best across the few 100 companies that we've worked with.

Lenny Rachitsky:I think this validates in some ways the role of a product manager where the PM's job is to help the team figure out what should we be building and are we all aligned on what we're building before we start designing and building and so this is almost like like this process is almost like the product requirements document of a company which I think a lot of product people listening to this will feel really good about.

Jake Knapp:Yeah we see this as a great tool for product people it's a way to give you a structure for leading your team through those decisions and a way to give the all the folks on the team including the the person who's the the product leader but the person who's the engineering leader the person who's the the marketing leader the sales leader the design leaders the exact right opportunity to contribute and participate in forming the strategy the exact right opportunity as we get into design sprints following the foundation sprints to then make it real and you know turn that that idea that hypothesis about what might work into hopefully evidence that it does work.

Lenny Rachitsky:I feel like it's actually more helpful than to engineers like non product people because I think a PM my brain would be like I wanna do this intuitively whether they do it right or not I think it's other functions almost they're like no just jump straight to design to prototyping let me ask you Walt we're on this tangent we're on this wild tangent out of this process but I wanna this question has been on my mind because I recently had a founder on the podcast Mayor who built this company called Base44 he built it sold in six months for $80,000,000 to Wix and the journey of that is he just had a problem he wanted to solve for himself or his girlfriend for a Scouts program he built it people started using it and kind of evolved it from there and obviously he didn't go through a process like this thoughts on just like is it okay to just do that when should someone think about okay I should actually set aside time to do a foundation sprint versus like I'm just motivated to solve a problem for my friends I'm just gonna build it evolve it iterate with them kind of go from there.

Jake Knapp:One of the observations from our hundreds of experiences working alongside founders in the early days of their projects and watching them make decisions and watching them try things and succeed or fail is that there are so many founders who are incredibly bright incredibly capable they have great insights about the market about an opportunity and yet their startup does not work out and we there's a a problem with selection bias that we you know we we hear from the folks who they were brilliant they were you know they they they checked all those boxes i just described they saw a great opportunity they they were smart they they you know executed well they had courage and conviction and they did it and it worked out and it was a tremendous success and i i think the the danger in thinking like well they didn't follow a process so i don't need to and you know that may be true and you know that's the maybe maybe you don't need it but what we believe is you have a better this just increases your odds this is a chance to to get more clear on is this a good opportunity to get more clear on will the thing i build click with customers and you know if you've already figured out that you know this thing's my my product has taken off my product is working we've actually had founders in labs who why they started off character labs they said you know i started selling this thing and it's already taking off i wanna stop running experiments and we're like yeah stop running experiments you don't need to do this if you've got product market fit if you've got evidence that this thing is clicking and you're you have conviction run with it but if you're not there this is a great path to get you going and if you're not sure if the thing you're gonna build is gonna turn into that you know $80,000,000 exit in you know in six months we believe this is a good chance to improve your odds

Lenny Rachitsky:People hearing this might be feel like i haven't heard of any company doing this that has become a trillion dollar ipo success what would make me believe that this is the process i should follow versus just i'm just gonna do what i hear and yc just build it launch it iterate that kind of thing what can you share to give people confidence this is the approach to take

John Zorotsky:Well the first thing i'd say is give us some time we're pretty new to this we started character labs about three years ago we created the foundation sprint about three years ago but more seriously when we were creating this method one of the things that we did was look back across all the projects we've been involved in and the ones that were really successful and we looked for patterns while those teams didn't have the foundation sprint they ended up having really clear differentiation and a really clear view of what made them unique that they were able to build on and as we ran design sprints with them we were able to test and validate against that differentiation so we believe that this is sort of a key to success even if those teams didn't have access to this exact same methodology

Lenny Rachitsky:So what i'm hearing is this is essentially like alpha starting a company this is a new process that companies are just starting to use you guys are working closely with founders and it's rooted in the success of many many many companies that you guys were involved in early on and continue to be involved in

Jake Knapp:Yeah it's based off of this thing we've seen again and again in the most successful projects when we're inside the room in the early days and we're seeing people make decisions this is what drives those decisions it's differentiation and so if we look back across you know all of the sprints that we've been a part of over the the years and john and i have been inside lots of these rooms lots of these conversations

Jake Knapp:Yeah this spans across google google ventures character capital and if you're watching on youtube you'll see all these little white circles and each one sort of represents you know a company that we've seen inside of during these design sprints and there are a lot of really great success stories in there you know we've had the chance to i mentioned the story of google meet and being there and figuring out what is it that's gonna make this thing stand out that was what made the project finally start to take off and to this day is still sort of what animates it being inside of you know the early days of what became google photos or google trips and and some of the early design sprints and there's a there are a lot of others on here but honestly of course we've also seen inside a lot that that didn't work out if we looked inside the greatest hits though the real smash successes we looked inside all of those we realized there is a common element and that common element in all of them is differentiation that there was clarity around this is what we're trying to prove to customers this is the promise we're making and so we we've been on those teams where we've worked alongside those founders who have this clear idea of differentiation and sometimes they're not right they run the experiments and they change it but the thing is they're keyed into differentiation as being crucial they're not just thinking about the product and trying to get the right shape of the product or trying to make it you know usable or whatever they're really keyed in on differentiation and how do we find the right promise and deliver on that promise and express that promise to customers so to explain a little bit quickly of what i mean by differentiation and how this is manifested in products we've seen if you go back to the early days of gmail in the february if you had email you were probably using hotmail or yahoo and it worked fine and you didn't have to think about it and this new product comes along and you're like god i'm not gonna wanna switch my email address what a hassle who wants to do that no one gmail's promise was hey massive storage great search and as we were building the product out and you know marketing explaining it to people and making decisions inside the project we had to continue to deliver on great search great search great search that was that was key to standing out you fast forward to 2014 and we're working with this tiny company who's now competing with gmail who's now like sort of the market leader people are used to using in you know in their teams and here's this new messaging software called slack and they're you know trying to reach new customers and gosh switching to slack is an even bigger hassle than switching to your email address because everybody on the team has to switch while slack says hey if you believe that having fun and boosting teamwork is important it's gonna be clear to you this is a new way of looking at the world and when they were making their decisions in their first big ad campaign their first big marketing campaign this was what they were trying to convey to customers so we kinda kinda see that from the inside another one we didn't see this one from the inside but one that we're all sort of familiar with is what happened with with chatgpt you know it goes from this trusted don't have to think about it i'm gonna run a google search to oh wow it's a new way of looking at the world there's zero clicks just tells you the answer this thing is great this is also something that we've seen in some of the early success stories from our own portfolio so 2019 this company called reclaim going after calendar management and you know most of us manage our own calendars most of us don't have administrators helping us out with that and you know it's free we're in control reclaim's argument was hey we can automatically we can use ai to help you focus and to automatically prioritize your calendar and that animated enough people to take the plunge and switch and try it out that they were able to build up an audience of you know tens of thousands of users and dropbox acquired them last year

Lenny Rachitsky:A great answer to my question you guys are well prepared for for those skeptics

John Zorotsky:Part of our motivation our our selfish motivation with this foundation sprint is that now that we are investing our own money into companies and we're working with all these founders we want them to have that same clarity on differentiation we saw how important that was to gmail and to slack and to all these other companies and we want to bring that we want to sort of give them that same advantage and help them avoid the pitfalls that all the other unsuccessful teams and companies that we've seen have fallen into so that's kind of what we're trying to do here is bring the the lessons from these really successful teams into you know any team that reads the book and runs this process

Jake Knapp:And the special sauce that john and i bring is that we're obsessed with the the sequence of decisions that you make and how you work together with your team to make good decisions quickly and that specificity about the the method is something that we we do have a lot of evidence behind it working well because of what's happened with the design sprint and with how many successful teams have have run that at those companies who are you know trillion dollar or whatever kind of giant all all kinds of teams run design sprints this is that same methodology around how we work together at high velocity and high quality and it's just brought to a a different part of the process

Lenny Rachitsky:Excellent answer speaking of the method we went on the world's most epic tangent i wanna bring us back we haven't finished actually going through the process i think we're towards the tail end of it so let's just finish that what else do you do so you have this this yeah i guess let's catch us up

Jake Knapp:Let's catch up with latchet so as a refresher for you who forgot latchet are building this tool for artisans they want to help them sell with the community networking features like you might find on substack and they've identified their differentiation they've identified their approach now using magic lenses and all of this is gonna come together to create a founding hypothesis so if we help artisans solve online sales growth with a social sales app and then they've also got their backup plan or we could build the full stack solution if if that doesn't work we believe they're gonna choose it over shopify and etsy because our solution is cooperative and easy to use and in this single sentence we've laid bare their strategy and now they're gonna try to find out does that work

Lenny Rachitsky:That is so cool so the output of the sprint is the founding hypothesis and i love that the term hypothesis is a part of this because it's not telling you this will work it's this is the thing you will now test

Jake Knapp:Absolutely and every project has at its core every new product has at its core a hypothesis they there is a founding hypothesis it's just usually not explicit it's usually hidden and different people on the team may have different ideas about what it is and because it's not explicit it's very hard to interrogate it and test it and find out if the the different variables in it the right variables

Lenny Rachitsky:I'm curious what's in that photo it's at the right as you're showing the YouTube.

Jake Knapp:Oh yeah if if you're on YouTube so that this is just we did this sprint together in person and so on Latchet's board here and you're gonna see that like here's where they wrote it out and took a photo of it and dropped it in and then later filled it out on the Miro board.

Lenny Rachitsky:Beautiful and I it has their old name there there.

Jake Knapp:That's right yeah yeah can't rebrand that lyric which it turns out is not the easiest for SEO there's a lot of lyrics out there.

John Zorotsky:There's a

Lenny Rachitsky:lot of lyrics I know some lyrics and just to understand is the next step the design sprint and that's where you actually start testing.

Jake Knapp:Exactly so if we zoom out now we see now they're gonna head into a sequence of design sprints running one after another each of those design sprints starts with the founding hypothesis then the team is gonna say okay what are the biggest risks that you know that hypothesis not being true what do we need to assess right now gonna make a map of how customers discover the product what that core experience looks like and then figure out using that map where's the where's the key moment for assessing that risk so for them the biggest risk is do people even will these artisans even want this thing are they actually gonna want to have a community sharing sort of sales platform and they decide the key moment for us to test that it's actually on the landing page they figure we can prototype landing pages that describe the product and learn a lot for our first experiment just just with landing pages they're gonna sketch solutions this will be familiar to anyone who's you know heard about design sprints i guess each person sketching their own proposal for how that key moment should work choose the strongest of those in this case they choose they're gonna actually prototype three things so they test three things head to head against each other fake brands for each one so they look like three different products and then this is a really key part at the end of the design sprint we've got a scorecard and this is actually a new innovation this is not in the sprint oh

Lenny Rachitsky:Shit here we go it's new hot off the presses design sprint improvement.

Jake Knapp:So this scorecard is gonna break down the founding hypothesis hey as we talk to each customer was this the right person is this the right kind of customer for us do they have the problem that we think they have was this the right approach for them did they choose it over the competition they're gonna test these prototypes head to head and also show people like okay here's Etsy here's Shopify now out of all these five options think about out loud about you know what do you what how do you compare these so do do we believe they'd they'd actually choose it did the differentiation actually work for those differentiators valuable and and motivating to them does it click so our new book is called Click and you know the the idea there is you can see when a product clicks with one person and that's a that's a helpful signal now granted these interviews are kind of a simulation it's not like the real world but they're a helpful signal that we're on track for product market fit if we see it gosh this product just seems to be clicking with customer after customer that's a really strong signal and that's when people start to get the confidence that it's time to build.

Lenny Rachitsky:That's a really good term by the way I feel that's such a good way to describe what it feels like it doesn't just click with them.

Jake Knapp:Just kinda clicks yeah and if you look across Latchet's first scorecard there's a ton of red it's it's a lot of things that didn't work and the the conclusion at the end in this last column there's a conclusion hey we interviewed in this case they interviewed four customers well it looks like this is the right customer it looks like they have this problem but everything else kinda didn't work about the hypothesis approach wasn't working differentiation wasn't working there's some mini hypotheses kind of about the prototype itself just lots of red on here so they sprint again.

John Zorotsky:And just zooming out for a second this is a team who just started working on this new company and sometimes it can feel slow we talked about it feeling slow to go through all these steps but they're only a week in and they've already built three prototypes and they've tested those three prototypes with four real customers and they have this super detailed scorecard of here's what's working here's what's not working that's after a week so it's interesting how what can feel slow in the hour to hour actually can really speed you up in the the weeks and months timescale.

Lenny Rachitsky:That was such good context because I was feeling that and to your point most founders do not do this much testing iterating learning in the first few weeks of their.

John Zorotsky:Yeah they might spend a few weeks just talking to customers without showing a prototype and then they might spend a few months building an MDP and then they might maybe they're going to spend some more time talking to customers while showing them the MVP maybe they'll do manual onboarding something like that but yeah that plays out over months and it fits with what founders tell us of course it's a subjective measure but founders who go through this process with us they say that they're able to accelerate three to four months of work into the three or four weeks of back to back sprints that we're doing together in character labs.

Lenny Rachitsky:Excellent context thanks for throwing that in there

Jake Knapp:And these conversations with customers are so much more fruitful and pointed when you've got the context of I know exactly what my hypothesis is and you have prototypes to show them. We have a founder in our group of startups in Character Labs at the moment I'm thinking of Maruthi John who's he comes from doing sales at Rippling and we had been talking to tons of customers while starting off the his company and he said you know I've had 50 conversations over the past month but I learned so much more from even the first conversation when I had a hypothesis and I had a prototype or a couple prototypes to show them it's like night and day.

Lenny Rachitsky:That is a great example this all makes sense as you guys describe it you're you're actually testing something very concrete that your entire team is aligned behind and actual prototypes and you've thought about different directions so it's you're testing something very specific versus just generally testing at your general concept

Jake Knapp:As we go into the second design sprint for Latchet they're making some edits to their founding hypothesis now they're you know revising a few things making new sketches new proposals for what this solution might look like they've learned a lot in that first sprint a new prototype that got a prototype that has more detail now so they are engineers they're starting to actually write some code and and put some more detail behind the product it's more robust and again they're trying to fix that positioning here's their scorecard and if you're watching on YouTube you'll be able to see it but again there's a lot of red here at first blush this the scorecard is is bleeding but there are some promising signs there's like maybe a few little sun breaks there's some spots where some of the red has started to flip to yellow and so if we look at the conclusion on the far right they're starting to believe their differentiation is dialed in and they're starting to believe that this could be the right approach they may be able to get people to choose it to the competition even though they haven't done it yet so those are starting to become yellow lights on the scorecard and now they'll take what they've learned and now we're into the third consecutive week of design sprints again they're gonna sort of review that founding hypothesis they're gonna sketch they're recruiting a new slate of customers as they do each week a new prototype again more code in the prototype it's it's becoming more and more robust more realistic as they're also adjusting the the marketing and the positioning at the same time so all of these things kind of go in concert the product itself and the marketing are are sort of one as they're as they're moving along and this is an extreme example what

Lenny Rachitsky:Yes everything is green

Jake Knapp:Everything's green if you can't see every single one is green

Lenny Rachitsky:Oh my god

Jake Knapp:And this is this is extreme but it is a pattern that we see this is real again and again this is a real example

Lenny Rachitsky:Wow how do I invest to get us in this round this is great

Jake Knapp:Yeah this is great

Lenny Rachitsky:This is great

Jake Knapp:So nice job so we see this again and again and I you know I can share a couple of other boards of ones that are in progress we're also constantly adjusting the templates so you can get to see a little bit more how the how people will edit their their founding hypothesis from sprint to sprint so you know Mello who we were talking about here's their first prototype and you know here's their first scorecard lots of lots of yellow for them maybe they're a little bit more likely to use yellow than red and then here's the edits to their founding hypothesis after the first sprint you know so you can kinda see in red they're changing slightly changing the definition of their target customer from the first week slightly changing the the problem that they're solving slightly changing the approach slightly changing the competition they've dialed in they've gotten more crisp on who are we up against they've gotten a little bit more crisp just a tiny tweak on what how do we explain this to people to get them excited about it what's the differentiation they sprint again they prototype again and if we just jump down and just looking at hypotheses they learn a bunch and now there's another slight tweak to that founding hypothesis and so week after week you're learning but you're also really able to able to track exactly what is it that we learned and how does that affect our our strategy

Lenny Rachitsky:Okay guys this was incredible I think we've we've covered the entire process I love that you also covered the design sprint pieces which which isn't part of this book but is such a core these things are very connected and meant to work together so you go from here's the thing we should be building to how to actually test it let me ask you before we wrap up is there anything else that you think is really important for people to know before they start trying this process at home and is there anything you can point them to to actually try this at home

Jake Knapp:One thing we didn't talk about we used an example of a company who's not building an AI first product Latchet's building a you know this this networked community sales platform for for artisans it'd probably be interesting to look at how people use this when they are building a a very technical product when they're vibe coding prototypes that's a question we're getting all the time what's the influence on this of the speed with which you could build something

Lenny Rachitsky:That's an awesome idea let's definitely do that yeah

Jake Knapp:Okay so let's jump in here and take a look at a company again in our current group of labs teams axione orbital it's called and the founder of denon jay is actually running this whole process solo which is pretty cool too he's a he's a remarkable guy we have a couple of solo founders right now and who are you know able to generate he can see just give like a sneak peek he's generating when we talk about customers all these sticky notes himself and making the decisions himself about which is the right one but to ground us in this story his founding hypothesis is he wants to help geospatial devs solve these sort of complex workflows with a browser based no code development environment so we'll we'll take a look just really quickly at what his prototypes look like and in the first week i can show you this prototype right here and it's a marketing page and on this marketing page there's a link to a to a video so if i click find out more i'm gonna see this video and this video is gonna kind of hear dan and jay talking over it and it's gonna kinda walk through a screen share of a very rudimentary version of what this product might look like now if you're watching on youtube and you see this prototype you might think boy that marketing page and the demo itself pretty bare bones not the most polished looking this is this doesn't look super compelling so he was focusing in that first sprint on the messaging you know on finding those those people who actually have that role testing it with them and he learned a lot so if we you know sort of go back to his his scorecard we'll see okay that was you know that was a pretty good one actually a lot of green on his first scorecard but he also felt like what he tested was was pretty incomplete now one thing that's cool here we saw the big leap with latchet from one week to another in terms of like their learnings and the scorecards one of the things that's interesting here is to go from vin and j's first prototype here to his second prototype and it's obvious he's been able to just build a ton in in the next week and he's using you know ai based tools he's doing a lot of work he's also just a terrific engineer but here we've got like a much more real looking marketing page very detailed and an important thing that he's done here with this is he's built out a lot and created a video of something so that the product while not fully functional you can see exactly how it works so if we sort of play this video he's created this demonstration of what it looks like when you type in a query into the engine and exactly the kinds of results you get and by doing a combination of vibe coding real coding all of which is based off of you know pencil sketches we can go back and see the sketches he's doing on paper to define this is what i think needs to be in there to make this compelling to deliver on my differentiation and then he's using a a product video so that the entire thing doesn't have to work fully free form that's what it can look like when a team is building something that's that's you know more ai centric when it's a more sophisticated tool when people are gonna be curious about the sort of the ins and outs of it

Lenny Rachitsky:So along those lines where do you find people are leveraging ai most in helping them through these sprints through either the foundation sprint or the design sprint is it mostly just vibe coding prototypes

John Zorotsky:That's definitely the first and biggest use of ai in sprint so far is is in you know making prototypes that look more realistic faster and you know it's kind of like having an entire prototyping team on standby right so that you don't have to just make it yourself and sort of piece things together but you can have a ton of people ready to jump in make something look really realistic but it's also really critical we found that while you're outsourcing that prototyping work you don't outsource the thinking you don't kind of skip over the part where you think about well what is the actual copy on the website how do i actually describe what the product is how it's differentiated and so it's one of the reasons why doing the foundation sprint first and then doing a design sprint can really help because it allows you to spend time working on that harder part of what it means to design and build a product and then once you have a clear view of that then you can use ai tools to go really fast and in this example that jake is showing of axia and orbital people get really clever about which parts of this need to be real which parts of this can be vibe coded which parts of this can just be a static figma mock up and it's all about creating a simulation something that looks realistic that you can put in front of real customers to help you answer the the key questions

Lenny Rachitsky:That's a really good point that you're making and again it's just a reminder you will move faster if you slow down a little bit at the beginning that because prototyping is so easy now and just things that look it's so easy to make something that looks really nice and kind of it's doing what you want but spending a little time making sure you understand what you're testing and what you want is becomes more important I see you pulling something up jake that might be

Jake Knapp:Yeah i think it's kind of interesting to see the sketches that went into denon jay's prototype the axiom orbital prototype that we just looked at because they they are super detailed and this is doing this level of thought where you're you're pausing you're being really intentional about what does the customer need to know what needs to happen for them to find a solution to their problem on know and within the product that's a way of doing your prompt engineering if you end up vibe coding this prototype but you start off with a very clear plan about this is what the thing needs to look at look like rather than going immediately into a conversational mode where you're sort of codesigning with the llm and going back and forth via chat conversation this is much likelier to yield an opinionated product that makes sense that's very clearly defined around the the problem that you're trying to solve the tasks that need to happen to solve that problem and the right messaging the right wording it's really crisply aligned with what you know about your customers what you know about what they care

Lenny Rachitsky:That's such a good point again just the concept of the primal mark is ringing in my head as you talk about this just as soon as you make that prototype everything from that point is a response to that first idea versus have i actually thought through what this should be guys we did it this is incredible i think this is gonna help a lot of people think through and actually save a lot of time is there anything else that you want to share leave listeners with maybe a last nugget or something you want to i don't know just double down on to leave folks with before we wrap up

John Zorotsky:One quick thing is that we've we've shared a lot of examples in this in this conversation and we actually have a template a miro template that folks can use if they wanna run their own foundation sprint it's the template that we use you know when we're working with founders taking them through these sprints we we do our work in miro even if we're in person with them we're usually working in miro or maybe working on paper and then capturing it in miro because it's just such a great canvas to work on and we'll make that template available so anybody who's listening or watching can grab that and use it to run their own foundation sprint

Lenny Rachitsky:That's amazing i you answered the question i asked that i forgot to come back to can we give people a url we'll put it in the show notes but should they is it at your yeah i guess where can folks find it

Jake Knapp:You should find it at character.vc and you can go there and we'll have we'll have

Lenny Rachitsky:A page for you to okay amazing so easy that is awesome I'm so that's awesome that you guys are doing that obviously you could also read the book and that goes through a lot of this process but I think the template is just like a plug and play let's just do this at home obviously if they want to go deeper they can work with you guys to have you it's such a win they take money you give them money and you help them figure out what the heck to build what a deal and that's also character.bc yeah do want to explore that

Jake Knapp:Yep

Lenny Rachitsky:Amazing okay is there anything else Jake that you wanted to share before we close-up

Jake Knapp:No just you know if if you made it this far hopefully your your mind and heart is is open to this idea but we know it's a lot to ask to clear the calendar and follow these these steps but if John and I weren't so convinced that beginnings are essential to getting your best efforts in the hands of people and to achieving the the things you want for your customers we wouldn't be doing this we wouldn't be going to all the trouble there are simpler things we should we could keep going after the kind of cool thing we've found about working in this way though we've we've focused a lot on finding product market fit and building your business getting started getting momentum getting alignment all these things that tactically are important that business wise are important but another part of it that's a nice side benefit that actually maybe is the most important thing of all is how close it brings you to your customers to the people who you're building for because you're interacting with them you're focusing on them as you plan and you're interacting with them on a weekly basis when you work in this way and how close it brings teammates together in a very authentic way we're working together on the most important things and we don't have to navigate the usual social dynamics of conversations where one person has an idea and they're pitching it we don't have to navigate the constant context switches of the calendar that dominates our days we're just working on the most important thing and the structure takes care of a lot of the the difficulty of the the process of what we should do and we just find people come out of it with renewed motivation renewed energy and renewed enthusiasm around the fact that they get to work on what actually matters to them

Lenny Rachitsky:Yeah and it just feels like really fun just this part of the process is so fun and then not having to decide how to approach it having someone just give you here's a framework to follow

Jake Knapp:It's like a yoga class right it's like I don't know how to

Lenny Rachitsky:Do yoga but just tell me

Jake Knapp:Explain to me step by step yoga for startups

Lenny Rachitsky:That'll be the title for this episode guys this was awesome I'm gonna skip the lightning round just because we've gone long cool and I guess just working folks finding online and how can listeners be useful to you

Jake Knapp:You can find me on LinkedIn John I think you can find you on LinkedIn too and we'd love for people to apply to character labs or if you know a founder apply to character labs get in touch with us character.vc

Lenny Rachitsky:There we go alright guys thank you so much for being here and for sharing

Jake Knapp:Yeah thanks Lenny thanks Lenny bye everyone

Lenny Rachitsky:Thank you so much for listening if you found this valuable you can subscribe to the show on Apple Podcasts Spotify or your favorite podcast app also please consider giving us a rating or leaving a review as that really helps other listeners find the podcast you can find all past episodes or learn more about the show at Lenny'spodcast.com see you in the next episode