In the third test (the Solution Test), Motive Communications focused on validating the final solution with a group they called lighthouse customers. The goal of the Solution Test was to perfect the solution in partnership with the lighthouse customers and then, when the product solution was nailed, scale it. However, Mike Maples Jr. and his team wanted to be sure their customers were committed, so they established three criteria for the lighthouse customers. First, the selected companies would have to pay $50,000 for the beta version of the product; second, the customers had to use the solution in their organization; and third, the customers had to be willing to be references for future customers. To conduct the test, Motive Communications selected twelve potential customers who were interested, and from this group extended offers to five of them.
Without explicitly recognizing it, Maples and his team were testing several crucial breakthrough questions at once, including whether the customers would pay and whether they would install the software system broadly. Despite the initial positive feedback, as the deadline for payment drew nearer, none of the pilot customers had sent in their payment. This was troubling to the Motive team, particularly in light of the prevalence of free software and free beta tests being conducted by other companies. The team tried everything to close the deal, including follow-up visits and exploding offers for discounts on the full version of the product. But none of it seemed to work. Maples and his team began to wonder if perhaps they should offer the beta test for free.
If you are operating on traditional product development logic, then a beta product is one that has been built according to specifications by engineers, tested for technical flaws, and been shown to a handful of customers in large focus groups. According to this traditional logic, customers should not be charged for the product because the product has not been completed. However, if you have followed the Nail It Then Scale It process, then at this stage the beta has had deep validation with customers. If customers won’t pay you now, then they probably won’t pay you later, and avoiding that day of reckoning is just delaying the pain.
So what did Maples and his team do? They believed in the process and held out. If customers didn’t pay, that would be an important signal that they had not yet nailed the solution. If customers did pay, that was also an important signal. In Motive’s case, the five customers did ultimately pay the $50,000 to be part of the beta. Not only did the five selected customers pay, but all twelve of the potential customers they selected paid for the beta. These customers went on to spend millions with Motive Communications, and the company eventually went public in part because they validated the solution and answered the breakthrough questions.