Jake Knapp & John Zeratsky: How a 2-day sprint sorts ideas

1. 0:00 – 4:41

   Introduction to Jake Knapp and John Zeratsky

   1. JKJake Knapp0:00

      We would have a conversation with founders. We're saying like, "Gosh, I'm almost too embarrassed to ask this question, but who exactly is your target customer?" And three co-founders have three different answers.

   2. JZJohn Zeratsky0:09

      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 it.

   3. LRLenny Rachitsky0:19

      Let's talk about the foundation sprint. Walk us through the process. How does it start? What are the steps?

   4. JKJake Knapp0:23

      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 10 hours roughly and go through a sequence of activities, so that we can make all of the key decisions together.

   5. LRLenny Rachitsky0:37

      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?"

   6. JZJohn Zeratsky0:42

      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 going to make your product unique. Going fast can actually slow you down in the long run.

   7. LRLenny Rachitsky1:01

      Today my guests are Jake Knapp and Jon Zeratsky. The framework that Jake and Jon 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 a foundation sprint and it emerged out of the famous design sprint, which Jake and JZ co-created, and also from working with over 300 teams, building both new products at startups and 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 posts of all time and was 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 what 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, to become an annual subscriber of my newsletter you get a year free of a bunch of amazing products, including Bolt, Linear, Superhuman, Notion, Perplexity, Granola and more. Check it out at lennysnewsletter.com and click bundle. With that I bring you Jake Knapp and Jon Zeratsky. 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 20X 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 any time. To learn more check out Brex at brex.com/banking-solutions. That's B-R-E-X dot com slash banking solutions. 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.

   8. NANarrator3:33

      Hey, Lenny. Thanks for having me.

   9. LRLenny Rachitsky3:35

      So integrations have become a big deal for AI products. Why is that?

   10. NANarrator3:40

       Integrations are mission critical for AI for two reasons. First, AI products need context from the customer's business data such as Google Drive files, Slack 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.

   11. LRLenny Rachitsky3:59

       So where does Paragon fit into all this?

   12. NANarrator4:01

       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.

   13. LRLenny Rachitsky4:15

       And I know from first-hand experience that maintenance is even harder than just building it for the first time.

   14. NANarrator4:20

       Exactly. We believe product teams should focus engineering efforts on competitive advantages, not integrations. That's why companies like You.com, AI21 and hundreds of others use Paragon to accelerate their integration strategy.

   15. LRLenny Rachitsky4:33

       If you want to avoid wasting months of engineering on integrations that your customers need, check out Paragon at useparagon.com/lenny.

2. 4:41 – 11:06

   Origins of the Design Sprint

   1. LRLenny Rachitsky4:43

      Jake and JZ, thank you so much for being here and welcome to the podcast.

   2. JZJohn Zeratsky4:49

      Hey, Lenny. Thanks for having us.

   3. JKJake Knapp4:51

      Yeah, thanks so much for having us on again. This is always a treat.

   4. LRLenny Rachitsky4:55

      This is going to be a very tactical conversation. We're going to 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. Uh, 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 posts of all time in my newsletter, uh, which is especially special because it not an AI-oriented (laughs)

   5. JZJohn Zeratsky5:22

      (laughs) Correct.

   6. LRLenny Rachitsky5:23

      It's one of the few non-AI posts that are near the top 10, uh, which just tells me how valuable this is to people and consistently it has sat there. It hasn't been usurped. It 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, uh, design sprint which 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?

   7. JKJake Knapp5:54

      Well, maybe I'll start by talking about the design sprint part because it is essential to understanding the foundation sprint-And the design sprint first developed, I, I had been working at the beginning of my career at Microsoft for a few years. Went to Google, this is like 2007, 2008, 2009, and was working on the Gmail team. Was working on some, you know, projects that were just executing well, delivering, shipping. But I had this other project, this side project, that had been going on for three years with a couple of colleagues, was going nowhere, and it looked like their office was gonna get shut down after the financial crisis. They were in Stockholm. I went there for a week, we cleared our calendars for a week, and we created a prototype of this, this thing, because we decided, "Look, we're, we're never gonna get anywhere. We've tried making the perfect pitch. We've tried to, you know, per- make the ideal PRD. We've tried to show the, the ideal design, and we just, we can't... Perfection is not working. We're not able to align people. We're not able to, to get, uh, sort of executive support for this thing." We couldn't convince Larry and Sergey and Eric that they should fund this thing. And in that week in Stockholm, we created a prototype instead. We decided, "You know what? Forget it. We're just gonna build something and put it in people's hands. Put it in our fellow Googlers' hands." And that prototype was what became Google Meet. It was this video conferencing tool that you could use in the, in the web browser.

   8. LRLenny Rachitsky7:20

      No big deal.

   9. JKJake Knapp7:21

      Yeah, it was, it was really cool. I mean, uh, the, the outcome of that, that's definitely the, probably the most productive week I've ever, I've ever had.

   10. LRLenny Rachitsky7:28

       (laughs)

   11. JKJake Knapp7:28

       But the, uh, the thing that struck me at the time, and in, in hindsight was, wow, it was so different to clear the calendar for a week and have the entire focal point of every person on the team be, "How do we create a prototype that's so real, that, that works so well, that people will think it's real, that they'll react like it's real, that they'll want it?" And we were in survival mode, you know? We were trying to keep that office from getting shut down. But the, the notion that maybe you could repeat that and recreate that is what led me to create the design sprint. So for a couple years at Google, I start running these one-week programs with teams trying to go f- at the beginning of a project from, you know, zero to a prototype at the end that we can, that we can sort of evaluate, test. And then I went to go work at Google Ventures. So separate, one of the Alphabet companies, we're investing in startups. I meet John Zeratsky, and we start running these design sprints with... Well, it turned out to be over the course of five years, uh, I don't know, couple hundred teams. Working in the early days with founders, in the early days of their, you know, establishing the product for the first time, trying to build it from zero to, to one or launching a new marketing campaign, a new ad campaign, some big high-risk endeavor. We'd get to work alongside them for a week. And we ended up refining this process into a recipe. So across five days, it's map, sketch, decide, prototype and test. One big focal point for each day, so at the end of the week, you've got a tested prototype, and you learn like, "Are we on the right track or, or not?" And that's the, that's the design sprint. That's kind of the, the, you know, the, the prologue, the, the backstory to this thing. And then after a few years at Google Ventures, John and I left, and eventually together with our co-founder Eli Blee-Goldman, we started our own venture firm, Character Capital. And that's kinda where the story of the foundation sprint comes in.

   12. LRLenny Rachitsky9:25

       Okay, awesome. Uh, JZ, anything you wanted to add?

   13. JZJohn Zeratsky9:29

       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, you know, for us, with our background as, as designers, that is the early days, the first couple of months or the first year or two years of building a m- a new business. And at GV, you know, sometimes we did that, but sometimes we were working with, with companies that were already well-established. And when we'd come into those companies, they kinda knew what they were doing, they knew what they stood for, they knew how they were different in the market and how they were p- positioned. And so we could help them, you know, answer these big questions and solve these problems and test their prototypes with customers. But when we started investing in, you know, truly pre-seed, sometimes inception stage, you know, pre-product, pre-revenue, pre-everything companies, there was this piece missing at the beginning of that process. So we'd, we'd run design sprints and they would be helpful, but oftentimes it felt like there was, there was a, a foundational element of that project that we didn't quite have our hands around. And it was things like, you know, "What is the problem you're solving and who's the, 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, um, at Character Capital in

3. 11:06 – 14:40

   The Foundation Sprint process

   1. JZJohn Zeratsky11:06

      2021, 2022.

   2. LRLenny Rachitsky11:08

      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.

   3. JZJohn Zeratsky11:23

      Yeah.

   4. LRLenny Rachitsky11:24

      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 which 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. Uh, walk us through the process. How does it start? What are the steps?

   5. JKJake Knapp11:42

      So specifically what we talk about with the foundation sprint is it's at the very beginning of your project. We recommend this kinda crazy idea that you clear your schel- schedule, you clear your calendar. So the core team, this is the co-founders if it's a startup. If it's a product team inside a large organization, it's...... but, 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 10 hours roughly, give or take, and during those 10 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've finished 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 (laughs) 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... 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 score card that relates back to the founding hypothesis. So at the big picture it's- it's gonna be anywhere from 10 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?

   6. LRLenny Rachitsky13:38

      Okay. That was really helpful. The 10 hours, is that specifically, that's the foundation sprint time box?

   7. JKJake Knapp13:43

      That's the foundation sprint-

   8. LRLenny Rachitsky13:44

      Okay.

   9. JKJake Knapp13:44

      ... time box, yeah. And it's- it's give or take, right? It might, you might go fast and be done in- in eight and you might have a lot of conversations and have a slightly larger team and it might take you 12. So we like to spread it out over two days, do two, you know, like four to six hour blocks.

   10. LRLenny Rachitsky13:57

       Okay. And then the three to four weeks-ish, that's including the design sprints?

   11. JKJake Knapp14:00

       That's the design sprints, yes. One week-

   12. LRLenny Rachitsky14:02

       Okay, awesome.

   13. JKJake Knapp14:02

       ... per sprint.

   14. LRLenny Rachitsky14:03

       Okay. This is incredible ROI on 10 hours of work, uh-

   15. JKJake Knapp14:06

       Totally.

   16. LRLenny Rachitsky14:06

       Basically over two days, you get to have a much stronger sense of whether your idea is any good. And you can te- yeah. That... Is that a simple way to describe it? Like, you just supercharge, uh, validating an idea?

   17. JKJake Knapp14:19

       Exactly, 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

4. 14:40 – 16:57

   Phase one: The basics

   1. JKJake Knapp14:40

      the right thing.

   2. LRLenny Rachitsky14:41

      Okay. Let's, uh, 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?

   3. JKJake Knapp14:48

      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 (laughs) 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, uh, 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, uh, if, for founders to have that- that clarity about, "Okay, here it all is in one sentence. Now let's

5. 16:57 – 28:50

   Case study: Latchet

   1. JKJake Knapp16:57

      go, let's go test and make sure this is true."

   2. LRLenny Rachitsky16:59

      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. Uh, 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. Uh, if you're on Apple, sorry, (laughs) we'll... But, uh, do your best to describe what we're gonna be looking at.

   3. JKJake Knapp17:15

      Yeah, so we're gonna talk about this company called Latchit first. This is the first company we'll talk about, and Latchit 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- a kind of an accelerator-like program that we run at Character Capital where we invest in a- 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...Uh, let's, let's talk about Latchet. So Latchet, a couple co-founders, 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, a, 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, 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. Wou- 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 of the, the backdrop to, to this little quick story I'll tell.

   4. JZJohn Zeratsky19:30

      And there's one really important thing to emphasize about Chris and James that Jake mentioned briefly, but I think is, is worth repeating, which is that they're engineers. They are builders. Their instinct is to write code. It's to build software. And, uh, 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, uh, more valuable it was to work in this way versus just diving right into building something.

   5. LRLenny Rachitsky20:19

      Uh, that's actually really helpful context. And I, speaking of the Substack recom- recommendations feature was one of the most game-changing features for me with my newsletter. So, uh, because it basically supercharged my growth. So I get why they'd be so excited about bringing this learning to other, to other ideas and to their own startup. So, uh, thank you guys for doing that, and-

   6. JKJake Knapp20:39

      Yeah.

   7. LRLenny Rachitsky20:39

      ... yeah, I'm even more excited to see what they're building.

   8. JKJake Knapp20:41

      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 kind of guide you through the process. But what happens in this first step in the foundation sprint and 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 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, and, 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 or 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 or 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, there are advantages. We talked about, you know, this, this key one, they built Substack's network growth feature, so they know how to do this thing. So now that we've established the basics, we're gonna move on to differentiation.

   9. LRLenny Rachitsky23:18

      Before you do that, actually, let me ask a question here, because I think people seeing this could think, "Oh, this is like, I know all this stuff, so obvi- like, it, like, it's like, okay, I get it. I have an idea. I don't need to do this." Where do you find people most are 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 you experience there?

   10. JKJake Knapp23:41

       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 would as- 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 we say, "Yeah. That looks r- that all 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 re- very reassuring that we have, we have clarity about that, and we've made it concrete."

   11. JZJohn Zeratsky24:44

       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 (laughs) that, uh, 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 aha moment when, uh, 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, 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, it is also, uh, an important moment for teams. And then I think that advantage, um, isn't necessarily immediately beneficial, but it becomes really valuable when the teams are looking at differentiation, because, you know, startups can't compete with big companies on scale or on, you, you know, having it 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?" (laughs) And, and you know, certain... When we're able to encourage teams to really think about that, um, it sets them up really nicely for the next step, which is differentiation, ideally based on those advantages.

   12. LRLenny Rachitsky26:20

       What I'm hearing is a lot of the value here is also just, uh, this everyone has what the answer is 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.

   13. JZJohn Zeratsky26:33

       Yeah, it's like-

   14. JKJake Knapp26:33

       Absolutely.

   15. JZJohn Zeratsky26:34

       ... 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. Um, and then, you know, ideally, if they're working, you know, with us in Character Labs, having somebody who's a bit external to push them and say, like, "Try harder. Like dig deeper."

   16. LRLenny Rachitsky26:53

       (laughs)

   17. JZJohn Zeratsky26:53

       Like, "What really makes you special here? How are you really gonna beat OpenAI? How are you really gonna beat Google at this?"

   18. LRLenny Rachitsky26:59

       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 people...

   19. JZJohn Zeratsky27:06

       (laughs)

   20. LRLenny Rachitsky27:07

       Like, it feels like that's just dead-

   21. JZJohn Zeratsky27:08

       (laughs)

   22. LRLenny Rachitsky27:08

       ... in every way.

   23. JZJohn Zeratsky27:09

       Yeah.

   24. LRLenny Rachitsky27:09

       I just had this naming expert on the podcast who names, named some of the biggest companies in the world, Pentium, PowerBook, Sonos, Vercel. And that's their approach, is they, they used to do brainstorms. He's like, "That doesn't work." And now they-

   25. JZJohn Zeratsky27:21

       Amazing.

   26. LRLenny Rachitsky27:21

       ... just have small teams sitting quietly in a room, working together on, on ideas and then thinking on their own. So that's-

   27. JZJohn Zeratsky27:26

       That's so cool.

   28. LRLenny Rachitsky27:26

       ... such an interesting trend. Yeah. And I feel like IDEO just, like, created this whole, "We need to brainstorm" post-its, and then-

   29. JZJohn Zeratsky27:32

       (laughs)

   30. LRLenny Rachitsky27:32

       ... everyone's like, "That's not actually working."
6. 28:50 – 36:24

   Phase two: Differentiation

   1. JZJohn Zeratsky28:50

      reach product market fit.

   2. LRLenny Rachitsky28:52

      Amazing. Okay. Let's keep going. So we've done the basics.

   3. JZJohn Zeratsky28:54

      Yeah.

   4. LRLenny Rachitsky28:54

      What comes next?

   5. JKJake Knapp28:55

      Yeah. So we've done the basics, and another important thing that we've accomplished while going through this 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 disc and the drive, and you'd have to, you'd have to boot up the, the app that you wanted to run. Th- 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 e- it's... It goes without saying perhaps, but we like to say it. (laughs) 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 w- so we have defenses up to save, to save calories in our brain. We just, we don't want to 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, you, 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 101 diagram. And in fact, we often refer back to this Steve Jobs, uh, iPhone introduction slide, where he talks about the, the iPhone and he makes a joke about it. "This is a business school 101 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, 'cause 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 continuums 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 s- places where we can stand out on these classics. That's great. These classics are easily understandable by any c- 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, uh, really s- 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, "All right, I wanna choose a couple of these and we're gonna try 'em 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, now 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 101 diagram. And so, you know, here's, here's this one for Outsized Lyric. They changed their name to Latchit, so I'm gonna, I'll edit that real time here.

   6. LRLenny Rachitsky33:29

      (laughs) I love this. So it's real time rebrand.

   7. JKJake Knapp33:31

      They, they just changed it. So, yeah. So Latchit's, you know, up here in the top right corner, and we say, "Okay, look, this is a good differentiation chart," 'cause you've got this quadrant here, this quadrant here, this quadrant here, right? You've got the... So you're in the top right and you've got-

   8. LRLenny Rachitsky33:46

      You gotta be in the top right.

   9. JKJake Knapp33:47

      What's that?

   10. LRLenny Rachitsky33:47

       You always gotta be in the top right. Always have to be top right.

   11. JKJake Knapp33:49

       You always have to be 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-

   12. LRLenny Rachitsky34:04

       Nice.

   13. JKJake Knapp34:04

       ... 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.

   14. LRLenny Rachitsky34:38

       Uh, before you move on to the next step, is that where you were going next? Just so I could take a-

   15. JKJake Knapp34:42

       Yeah, yeah.

   16. LRLenny Rachitsky34:43

       ... okay, follow a couple threads.

   17. JKJake Knapp34:44

       Yeah.

   18. LRLenny Rachitsky34:44

       This is so awesome. There's so many... There's just so much value here. Um, also just the slide at the end here, if folks are watching YouTube, this is like your deck slide, right? Where you show-

   19. JKJake Knapp34:54

       Yeah.

   20. LRLenny Rachitsky34:54

       ... your, your competitors and how you're, you're better than them all.

   21. JKJake Knapp34:57

       Yeah. And actually, I wanna jump on that for a second-

   22. LRLenny Rachitsky34:59

       Uh-huh.

   23. JKJake Knapp34:59

       ... 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 (laughs) running these foundation sprints, three or four years ago. And I think the reason why usually these, these two-by-two diagrams feel like this is just consultant baloney, this is just like, who, you know, it's... It's because you, you know, maybe one person makes this chart and they do it quickly 'cause 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 and we've seen it, it's, it becomes this, uh, well, this guiding light. Here's the North Star. We need to deliver on this. This is what w- we have to create. And that helps you make decisions all the way through your product development cycle.

   24. LRLenny Rachitsky36:23

       ...

7. 36:24 – 40:15

   The importance of differentiation

   1. LRLenny Rachitsky36:24

      just to point people to, uh, justification for why differentiation is so important, there's a couple episodes that I did that, uh, I'll point to in the show notes, um, that just r- give you more context on why you need to differentiate. So, I spoke of, uh, David Plastic, 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, like, Sonos or Vercel or Windsurf, it's diff- it has to differentiate. Yeah. And he talks about this in depth. So, um, we'll point to that episode. If you're- and this is just, like, if you're not convinced, why are we spending so much time on differentiation. Uh, also April Dunford, who's, like, the, I don't know, the- the- the god of- of- 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 y- differentiation is a really important step and element of successful companies.

   2. JKJake Knapp37:13

      Yeah. 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... W- we were, uh, uh, invited in to speak at OpenAI and Anthropic about this, and we see the product people there being like, "Oh my God, this is- this is really powerful. This is the kind of stuff we need." I think for a lot of folks though, it can sound like, "Ah, this is just elementary. You know, uh, 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 kind of 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.

   3. LRLenny Rachitsky38:28

      One of the most useful steps here that, uh, 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 l- 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, a couple more.

   4. JKJake Knapp38:50

      So, I'm just gonna jump into another startup here just so we can see what this sheet looks like with scores on it.

   5. LRLenny Rachitsky38:56

      Awesome.

   6. JKJake Knapp38:56

      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 w- 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 again, we wanna make differentiation something that all of the co-founders 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 p- perspective in on it. And this is a great warmup activity before we start to write our own custom

8. 40:15 – 43:37

   Thoughts on price differentiation

   1. JKJake Knapp40:15

      differentiators.

   2. LRLenny Rachitsky40:17

      Awesome. And then, again, this is just inspiration for coming up with more ways to differentiate. Something that is a common, uh, 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?

   3. JZJohn Zeratsky40:33

      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. Like, it's gonna be hard to build a product that's faster than what Google can build or what OpenAI can build. It's gonna be harder to be cheaper than those competitors because they just have so many more resources. They can have loss leader products that are- 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, you know, we have a company that we invested in called Bindwell, and, uh, they use AI to design precision pesticides. And, uh, we ran a foundation sprint with them right after investing. And, you know, five years ago, you couldn't design pesticides with AI, right? It wasn't- it wasn't possible, right? If- if you- even if you had that idea, you wouldn't have been able to build it. And now you can. And so for them, one of the big advantages is like, yeah, these pesticides, they can be- they can be a lot cheaper because it doesn't require this, like, massive team of, you know, R&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.

   4. LRLenny Rachitsky42:17

      That is such a good point, uh, 'cause historically, price has been a, "Don't- don't compete on price." Like be- for exactly what you said, it's n- it's hard to do long term. It's kind of race-

   5. JKJake Knapp42:25

      Yeah.

   6. LRLenny Rachitsky42:25

      ... to the bottom.Especially if there's any comments, they can price a lot lower. But with AI, that is a really often and strong com- uh, differentiator. Like, now do this thing. Like, like Cursor basically is competing on.

   7. JZJohn Zeratsky42:37

      Yeah.

   8. LRLenny Rachitsky42:38

      Uh, you know, you're saving engineering time, and, you know, it's worth so much money to you.

   9. JZJohn Zeratsky42:42

      Yeah.

   10. LRLenny Rachitsky42:43

       So I think that-

   11. JZJohn Zeratsky42:43

       But at the same time, like, the output of the AI is probably not gonna be quite as good as a human process.

   12. LRLenny Rachitsky42:48

       Yeah.

   13. JZJohn Zeratsky42:48

       So it can-

   14. LRLenny Rachitsky42:49

       For now.

   15. JZJohn Zeratsky42:49

       ... be a little bit cheaper. Yeah, for now, but it has to be a lot cheaper.

   16. LRLenny Rachitsky42:53

       Has to be a lot cheaper. Yeah, yeah.

   17. JZJohn Zeratsky42:54

       It has to be... You know, I've heard people offer 10X cheaper than the-

   18. LRLenny Rachitsky42:57

       Yeah.

   19. JZJohn Zeratsky42:57

       ... legacy sort of, um, manual approach to solving that problem as a-

   20. LRLenny Rachitsky43:01

       Yeah.

   21. JZJohn Zeratsky43:01

       ... rule of thumb.

   22. LRLenny Rachitsky43:02

       That's awesome. Okay, uh, I'll just quickly reference, there's an episode that will come out before this with Madhavan about pricing strategy, and there's a lot of discussion actually on this.

   23. JZJohn Zeratsky43:09

       Oh, great.

   24. LRLenny Rachitsky43:10

       Especially with how to design your price, uh, with customers as you're starting a company. Also, uh, the episode with, uh, 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 un-... 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 to

9. 43:37 – 46:04

   Case study: Mellow

   1. LRLenny Rachitsky43:37

      achieve it.

   2. JZJohn Zeratsky43:38

      One of the things that's really interesting about this example here that we're looking at, Melo, is that you can see that they were not the best on all these scales. You know, it's, if 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, you know, 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, um, it's gonna improve your chances of, of winning and finding probably market fit. And, 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 'em, but 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."

   3. LRLenny Rachitsky44:44

      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, the 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.io/lenny today and get six months free of the team plan for startups. That's C-O-D-A dot I-O slash Lenny to get started for free and get six months of the team plan. Coda.io/Lenny.

10. 46:04 – 49:30

    Custom differentiators

    1. LRLenny Rachitsky46:04

       Anything else on differentiation before we move on to the third step of designing your approach?

    2. JKJake Knapp46:10

       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 Melo, we've got, uh, 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 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 'em. You know, when they get honest and look through, they're like, "Well, actually, uh, 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."

    3. LRLenny Rachitsky47:43

       Where did Melo land on the differentiators they picked, and where did Latchit land?

    4. JKJake Knapp47:47

       Yeah, let's take a look. For Melo, they tried out a bunch before they decided here. So they actually scored with the competitors on these scales.

    5. JZJohn Zeratsky47:57

       And just for context, Melo is a tool that allows you to run very simple, very targeted, very useful AI agents for common everyday tasks like summarizing your email or, um, uh, 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 overpromised about being able to replace all humans and do anything and, you know, um, 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, and they can deliver on that promise of, you know, making your life better by offloading, uh-... re- tedious tasks, that that's gonna really click with, with customers.

    6. LRLenny Rachitsky48:49

       That's great context. Thank you for adding that. (laughs)

    7. JKJake Knapp48:52

       So Melo lands on mobile first and works out of the box, as their two differentiators. And they're trying to differentiate from, you know, Gumloop and OpenAI as sort of a generalized tool, right? And Latchit, they're gonna differentiate on...

    8. LRLenny Rachitsky49:10

       Now, you're pulling it up. If folks aren't watching, he's pulling up the Miro board, uh, to show us where they landed.

    9. JKJake Knapp49:15

       Latchit, 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

11. 49:30 – 52:02

    The mini manifesto

    1. JKJake Knapp49:30

       does both of those things well.

    2. LRLenny Rachitsky49:32

       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. Uh, so let's move on to the next step in which is the final step of the foundation sprint.

    3. JKJake Knapp49:45

       Yeah. So closing off differentiation, uh, is a short step that, uh, is just to create some project principles that'll help you make decisions in line with that differentiation. And, you know, you were just talking about Superhuman and differentiating on speed, and when John and I worked at Google back in the 2000s, there was this list called 10 Things We've 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, 12 milliseconds faster. That's probably gonna be the one we're gonna take," as there's gotta 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, uh, for us in those contexts. We think, "Hey, this is an easy moment. You've got your differentiators kind of loaded up in your mind. Let's take a second here and just think, well, what's a principle? How could we turn that into a principle?" So, uh, if we take a look at, uh, Latchit, 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.

    4. LRLenny Rachitsky51:39

       This is so cool. And, uh, this looks like it would take a lot of work. But again, this is just, uh, a day or two of sitting around, working through this framework.

    5. JKJake Knapp51:48

       Yeah. You'll get to this in, you know, four-ish hours with your team.

    6. LRLenny Rachitsky51:52

       Okay. By the end of the first day, you'll have a mini-manifesto that describes how you win, essentially, as a, as a company and a startup.

    7. JKJake Knapp51:59

       Yeah. Or how you believe it's gonna work. And of course-

    8. LRLenny Rachitsky52:01

       Right.

    9. JKJake Knapp52:01

       ... we're gonna test it.

12. 52:02 – 54:50

    Phase three: Approach to the project

    1. JKJake Knapp52:02

    2. LRLenny Rachitsky52:02

       Yeah.

    3. JKJake Knapp52:02

       Now, the next phase of the foundation sprint is locking in on the approach we're gonna start with. So we'll continue the story of Latchit here to, it's easier to use an example than to describe this in the abstract. So coming into Character Labs, Latchit 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 plug-in. That's a simple way to kinda piggyback on something people are already doing, right? (laughs) They're 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, and we're actually gonna get some traction and get this thing going?"

    4. JZJohn Zeratsky52:51

       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 could 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. Uh, what's the right approach for us to take?"

    5. LRLenny Rachitsky53:27

       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've probably spent time building and then realizing, "Okay, this doesn't make any sense. It's just like what everyone else has."

    6. JKJake Knapp53:38

       T- totally. Totally, yeah. And we usually see teams starting projects in one of two states. And one state is the state that Latchit 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 hours-ish 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

13. 54:50 – 1:02:39

    Magic lenses activity

    1. JKJake Knapp54:50

       that happen.So, what we're gonna do on the second day of the foundation sprint for this, sort of, third phase, which is the approach, is to identify those different pads. So for Latchit 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 advisors 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 advisor 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 there the 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 u- almost always create some lenses of their own, some custom lenses that matter to them. You know, they might have one about their conviction. Um, I think there's, uh, there's sort of a humorous one from Melo where it's like, which, you know, founder is like, "F yeah, it's exactly what I wanted, what I wanna build." And on the other end of the spectrum, it's like, you know, "Nah," just kind of the, the, the sort of heat of excitement that you feel. That might be a really important decision point.

    2. LRLenny Rachitsky57:04

       That feels really important. Like, that feels like that should be one of your... You call these the magic lenses?

    3. JKJake Knapp57:08

       Yeah, yeah.

    4. LRLenny Rachitsky57:09

       Yeah.

    5. JKJake Knapp57:09

       It probably should be. It probably should be

    6. JZJohn Zeratsky57:11

       I feel like-

    7. JKJake Knapp57:11

       ... all the good...

    8. LRLenny Rachitsky57:11

       ... just, like, how excited are you to build this? That feels like a really important piece.

    9. JKJake Knapp57:14

       Yeah. We saw that one in... This is the, our cohort of labs that's going on right now. And I'll bring that one, that one up for, um, for context just

    10. JZJohn Zeratsky57:22

        If we add it, we can call it the Lenny lens.

    11. JKJake Knapp57:24

        The Lenny lens. Yeah.

    12. JZJohn Zeratsky57:25

        Yeah.

    13. JKJake Knapp57:25

        Oh, that's a good idea. Yeah.

    14. JZJohn Zeratsky57:26

        Owner of.

    15. JKJake Knapp57:27

        So yeah, so here it is. And, um...

    16. LRLenny Rachitsky57:30

        (laughs)

    17. JKJake Knapp57:31

        You can see that Maria is more likely to swear than, than Ben apparently, but, uh, 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, uh, 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."

    18. LRLenny Rachitsky58:03

        Awesome. I, I, (laughs) I love that lens. I love that you asterisk out, (laughs) so it's not a little bit sicker.

    19. JKJake Knapp58:09

        A little bit. A little, little, just slightly concealed.

    20. LRLenny Rachitsky58:11

        Slightly.

    21. JKJake Knapp58:11

        That's the... Well, the part... Yeah. If you zoom in, it's, it's actually, uh, not censored. So the cool thing about this lenses 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? What's 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 'cause 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 d- 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.

    22. LRLenny Rachitsky59:24

        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?"

    23. JKJake Knapp59:36

        (laughs)

    24. LRLenny Rachitsky59:37

        And this is... And this to me is a big part of the answer, is 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, quick 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.

    25. JKJake Knapp1:00:10

        And it's also the case that you start building something, it's exciting, you can move fast. It's easy to s- easier and easier to see progress now with AI tools. And that active 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, it... 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...... the, 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, this, this, the swamps or whatever.

    26. JZJohn Zeratsky1:01:13

        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. You know, they're all basically pretrained 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, you know, let's say you launch it, and that, you know, 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, you know, tried it. Maybe they landed on your website and they're like, "Blah." Another like, another generic AI generated thing. Like, uh, it's, that's not worth my time. And so, uh, we think it's really helpful to basically put yourself in a situation where you can slow down a little bit and do some like, some, some hard thinking, some deep thinking about what's actually gonna 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, um, 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

14. 1:02:39 – 1:10:00

    Prototyping and testing

    1. JZJohn Zeratsky1:02:39

       run.

    2. LRLenny Rachitsky1:02:39

       Yeah, to build on that, I had this guest recently, Bob Baxley.

    3. JZJohn Zeratsky1:02:43

       Yeah, we know Bob.

    4. LRLenny Rachitsky1:02:44

       Who is a... Okay, so he has this really interesting insight. He calls, uh, he calls it, 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.

    5. JZJohn Zeratsky1:02:57

       (laughs)

    6. LRLenny Rachitsky1:02:57

       Because as soon as you start drawing what you're building, it now, everything you do will be a response to that.

    7. JZJohn Zeratsky1:03:03

       Mm.

    8. LRLenny Rachitsky1:03:04

       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.

    9. JZJohn Zeratsky1:03:12

       Yeah. That is super interesting, and, uh, you know, it's, it is-

    10. LRLenny Rachitsky1:03:16

        Yeah, and counterintuitive.

    11. JZJohn Zeratsky1:03:17

        Yeah.

    12. LRLenny Rachitsky1:03:18

        Also.

    13. JZJohn Zeratsky1:03:18

        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, in the work that we do is that, we used to just run design sprints with, with every team. Like, that was our hammer, and, and, you know, 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, 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 in to, to that approach.

    14. LRLenny Rachitsky1:03:59

        That's such a... Like, I love that, that this emerged out of that. Like, you guys are s- were 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, and maybe as a result, and then this is almost like a, okay, maybe that wasn't the right approach to start. Maybe it's actually better to think a little bit th- of what we want to design and build before. And so, just the fact that you guys spent so much of your life and time on that and then realized this is actually potentially even more important to do, uh, is, it says a lot.

    15. JZJohn Zeratsky1:04:33

        Well, and I, ideas always get distilled down to, like, one thing that people grab onto and they, they focus on. And I think with the design sprint, it got distilled down to just build a prototype. Like, just, just quit messing around and build something. But, you know, the reality is when you run a design sprint, it's five days, and you don't build the prototype until the fourth day, right? So you do, you do a bunch of work to figure out, um, you know, what is, uh, how does our customer learn about this thing? Um, you know, 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 the, that method has become really widely known, uh, people just think about the, you know, let's build something, and then once you multiply that times the, the power of AI, it definitely creates this narrative that the, the only way to build something new is to just create the product as quickly as possible. And that, that doesn't really m- match our experience, you know? That doesn't really kind of fit the pattern of what we've seen working best across the few hundred companies that we've worked with.

    16. LRLenny Rachitsky1:05:44

        I think this validates, uh, in some ways the, uh, role of a product manager.

    17. JZJohn Zeratsky1:05:48

        (laughs)

    18. LRLenny Rachitsky1:05:50

        Where a 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, uh, so this is almost like, like this process is almost like the product requirements document of a, of a company, uh, which I think a lot of product people listening to this will feel really good about.

    19. JKJake Knapp1:06:09

        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, you know, 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 sprint to then make it real. And, uh, you know, turn that, that idea, that hypothesis about what might work into hopefully evidence that it does work.

    20. LRLenny Rachitsky1:06:54

        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, uh, intuitively." Whether they do it right or not. I think it's other functions almost that are like, "No, just ju- jump straight to design, straight to prototyping." Let me ask you, uh... Like while we're on this tangent, we're on this wild tangent out of this process, but I wanna, uh... This question has been on my mind, uh, because I recently had a founder on the podcast, uh, uh, Mayhor, who built this company called Base44. He built it, it sold in six months-

    21. JKJake Knapp1:07:26

        Yeah.

    22. LRLenny Rachitsky1:07:26

        ... for $80 million to Wix. And the journey of that is he just had a problem he wanted to solve for himself, for his girlfriend, for a scouts program. He built it, people started using it, and he 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 so I'm just gonna build it, evolve it, iterate with them, and kind of go from there"?

    23. JKJake Knapp1:07:58

        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 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.

    24. LRLenny Rachitsky1:08:51

        Mm-hmm.

    25. JKJake Knapp1:08:51

        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, that... 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 none of these things, my, my product has taken off, my product is working, we've actually had founders in labs who while they started off at Character Labs, and 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 million exit in, you know, in six months, we believe this is a good chance to improve your odds.

    26. LRLenny Rachitsky1:09:59

        People hearing this might

15. 1:10:00 – 1:15:15

    Real-world examples and success stories

    1. LRLenny Rachitsky1:10:00

       be, feel like, "I haven't heard of any company doing this that has become a trillion dollar IPO success. Uh, what, what would make me believe that this is a, the process I should follow, versus just, I'm just gonna do what I hear on YC, just build it, launch it, iterate, that kind of thing?" What can you share to give people confidence this is, uh, the approach to take?

    2. JKJake Knapp1:10:20

       Well, the first thing I'd say is give us some time. (laughs) We're, we're pretty new to this. We started Character Labs about three years ago. We created the foundation sprint ab- 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. And 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 sort of, uh, test and validate against that differentiation. Um, 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.

    3. LRLenny Rachitsky1:11:07

       So, what I'm hearing is this is essentially like alpha in, uh, 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.

    4. JKJake Knapp1:11:25

       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-

    5. LRLenny Rachitsky1:11:51

       And if you're now watching on YouTube, by the way, there's a cool visual that, um, that Jake is showing.

    6. JKJake Knapp1:11:55

       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 Meets 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, there are a lot of others on here. But honestly, of course, we've also seen inside a lot 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've, we've been on those teams, or 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 has manifested in products we've seen, if you go back to the early days of Gmail in the 2000s, you know, 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? You know, no one. Gmail's promise was, hey, massive storage, great search. And as we were building the product out and, you know, marketing and 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. Well, 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, "I don't have to think about it, I'm gonna run a Google search," to, "Oh, wow, this is a new way of looking at the world. There's zero clicks. Just tells you the answer. This thing's great." This is also something that we've seen in some of the early success stories from our own portfolio. So 2019, this company

16. 1:15:15 – 1:17:15

    Motivation behind The Foundation Sprint

    1. JKJake Knapp1:15:15

       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, uh, Dropbox acquired them, uh, last year.

Episode duration: 1:41:33