New Business Opportunities and Customer’s DiscoveryMay 2013
Objectives• Understand the origin of new businessopportunities: the problems and needs theyaddress.• Understand the importance of exploring theneeds and context of the customer. Acquiremethodologies that allow you to doexploratory work.
Subjects to be Covered• Social contract.• Foundations of the LeanStartup method.• What is a relevant problem?• Intensity of the Problem.• Customer’s pain and the limitsof market research.• Ethnography.• Types of customers.• Who experiences the problem.• Customer’s Context.• Empathy Map.• Importance of the context.• Storytelling.• What to do with fieldworkresults.• Next steps.
Social Contract• Listen, be opened to criticism and feedback from clients, facilitatorsand consultants.• Cooperate with your peers (ask for advice and provide it, support theaccess to social networks, etc.). Give without expecting anything inreturn in the short run.• Do the required work.• Dont hide information, be open, transparent and trustworthy.• Mistakes are possible, be willing to change your route if there isenough evidence to support that move. Participar en lascomunidades de aprendizaje.• Dare to ask for help (use the learning community).• Dare to fail.
The success ofcustomerdevelopmentstarts withbuild-in support.14
Startup Definition“A startup is an organization formed to searchfor a repeatable and scalable business model.”(Steve Blank)“A human institution designed to createsomething new products and services underconditions of extreme uncertainty”.(Eric Ries)
Validated LearningIs the proccess in which you learn by testing an initial idea andmeasure if it achieves the expected results (sales, customersatisfaction, positive evaluation of the concept, etc.).
Minimum Viable Product“Is that version of a new product which allows ateam to collect the maximum amount ofvalidated learning about the customers with theleast effort”.(Eric Ries)
Be aware of the traps in which theentrepreneur could fell…The double trap of the interaction with thecustomer: not interacting with the customers earlyenough, and not approaching their needs. On theother side, is not in the role of the customer toinnovate for you.
Be aware of the traps in which theentrepreneur could fell…Confirmation bias: see what you believe to be true,and just looking for evidence that supports yourinitial beliefs, disregarding opposite evidence.
Be aware of the traps in which theentrepreneur could fell…The trap of motivation (falling in love of yourproduct): not being impartial, just supporting thefans.
Be aware of the traps in which theentrepreneur could fell…The trap of overconfidence: Chernobyl case.
Be aware of the traps in which theentrepreneur could fell…The trap of familiarity: doing things the sameway over and over again.
How startups are born“The Lean Startup”, Eric Ries
Business Opportunities haveMultiple Origins: Problem
Business Opportunities have MultipleOrigins: Customer Segment
Business Opportunities haveMultiple Origins: Product
Business Opportunities haveMultiple Origins: Technology
"People dont want to buy aquarter-inch drill. They want aquarter-inch hole!”(TheodoreLevitt).Its not about the product, itsabout the jobs they are tryingto get done…
Outstanding companies build upongreat problems• The biggest problems are those the humanityshould face and that affect millions of people:food provision, access to water, infectiousdiseases, climate change, clean energy, scarcityof natural resources, education, etc.
Ramez Naam “The Infiine Resourse: Thepower of ideas on a finite planet”Optimist approach onhow to expand thelimits and solve theproblems that affectthe world: food, waterand energy.
John Doerr: The problem withsustainabilityA venture capital with a broadtrajectory, who looks to addressthe problem of sustainability.
Shark Bite vs. Mosquito BiteIts better to solve a life or death problem to justone person, than to solve a very small problemthat affects millions.
Vinod Khosla and thinking bigThe venture capitalistVinod Khosla, founder ofKhosla Ventures, statesthat “any big problem is abig opportunity. Nop r o b l e m i s n oopportunity.”
Examples of companies that solveimportant problems• Tesla Motors: oil dependancy.• Zip Car: Savings and transport.• Kickstarter: funding of creative projects. Kiva:access to microfinance.• Angel List: Access to angel investment.• Khan Academy: Learning from distantplaces.• Airbnb: Lodging.
DESCRIPTION OFTHE PROBLEM• Activity 1 (15 min)1. Individually, identifyand describe theproblem you addressor that you are tryingto solve with yourcompany or businessidea.2. Then, comment ingroups of 4 people.Provide feedback andlisten to the advicegiven to you.
INTENSITY OFTHE PROBLEM• Activity Nº2 (15 min)1. Individually, answer thefollowing questions: Inwhich other ways arepeople solving thisp r o b l e m ? W h a talternative solutions areavailable? Are thisa l te r n a t i v e s g o o denough? What is thei n t e n s i t y o f t h i sproblem? (Shark ormosquito bite)2. Then, each group shouldcomment.
Not every need can make for abusiness• A need can be like atourniquet, a matterof life or death. Or itcan be somethingirrelevant.• It can affect many orfew people.
Not all customers are the same – Cycle of theAdoption of New Technologies
WHO IS YOURCUSTOMERActivity 3 (15 min)Individually, list who yourmain customers are andidentify which ones are“early adopters”, thosewho experience theirneed or problem with ah i g h e r d e g r e e o fintensity. Comment.
How to build it1. Define your customer– Name– Age– Personality– Other2. Build the Map
CosmetofoodDrinks for skin health andbeauty based on moleculesextracted from berries andgrapes..
1. Profile definition• Name:Margarita M.• Age:35• Additional information:Mother of one child.Married.Works during the day.Worried about the wellbeing of her family.Definición dePerfilMujer30 a 60 añosProfesionalNivel socio-económico medio / medioaltoCon familiaJornada laboral demandante
2. Construction of the mapA pollutedplanet Have littletime formyself I have littletime for me My familycomes ﬁrst I feeloverwhelmed My husbanddoesntsupport me Recommendations from myfriends Advertisements that getmy attention You aregetting older No time forexercising ón demico medio / mediomandanteHave time forherself My familywell beign Feeling young Looking forbautyproducts atthesupermarket. Growing old Not ﬁndingnaturalbeautyproducts. Not havingenough timefor herself. Not anynaturalproductsavailable.
EMPATHY MAP • Activity 4 (20 min)1. Individually, complete theempathy map of your maincustomer segment.2. Visualize him or her as anindividual person: what wouldher name be, how old she is,what is her activity and mainfeatures.3. If your customer is acompany, think about thedecision maker, the buyer orthe user of the solutioninside the company.4. Then present the canvas tothe rest of the group.Comment and receivefeedback.
There are no customers without apain to addressThe main cause for failure in newcompanies is the lack of a real problemfaced by customers willing to pay.
Customer’s pains are the businesshipothesis• Each problem or need is a business hypothesis.The value proposition, to be consistent, shouldaddress this problems or needs.• The only way to know if our assumptions arereal, is to get out to the street and meet them.
How to explore and understandthe customer’s needs?
"Its really hard to designproducts by focus groups. Alot of times, people dontknow what they want untilyou show it to them.”.(Steve Jobs)
Traditional Market ResearchA big number of products and services that are launchedevery yeart fail, even if they invest heavily in marketresearch, because they dont consider the customer`sperspective.The evidence indicates that entrepreneurs thatunderstand customers needs have higher chances ofsuccess than those that start just with a technology orproduct.
People are not going to ask for somethingthey don’t know it is tecnically feasible.Flaws in traditional marketresarch1...However, there might be problems withouta current solution
“If I had asked people what they wanted, they would have said faster horses.”Henry Ford
People usually fail at explainingtheir own behaviour.Flaws in traditional marketresearch2
3. People tend to give answers that they think are expected or thatwould please the interviewer.4. People when interviewed dont remember emotions or feelings theyexperience while using products or services.5. The imagination and desires of people respond to their experience, sothey accept the imperfections of the world as normal.6. Questions are usually skewed and reflect the assumptions of theresearcher.Other flaws...*Fuente: "Taking and Expanded View of Costumers Needs" (María Flores, Charles Spinosa y Bobby Calder; Marketing Research, Winter 2000)
Some key issues…• Avoid doing focus groups or surveys:– The surveys assume you already know the questions toask: one interview allows to explore subjects that gobeyond your initial understanding.– Even worse, the surveys assume that you already knowthe right answers.– You cannot see a customer during an interview (nonverbal language is important).– The focus groups lead to wrong answers: groupthinking.
“Carefully watch how people live, get an intuitivesense as to what they might want and then gowith it. Don’t do market research.”Akio Morita
African Mongoose and the rats in Hawaii:• Importance of the context.• In Hawaii there was a problem with a plague ofrats.• A predator was brought to the island, theAfrican Mongoose.• As a result: there were two plagues in Hawaii.Why this happened?
STORYTELLINGActivity 5 (25 min)Individually, explain theproblem that the customerfaces: what happens before,during and after the problemarises. Present the problem asthe script of a movie.U s e t h e fo r m a t o f astoryboard (look at the nextslide).Then, choose two cases ineach group and present thestory in no more than 5minutes to the rest of thegroup.Provide and receive feedback.
Guide for Observation Field Work• Field work consists of looking for graphic evidence ofthe existence of situations of the need or problem to beaddressed by the solution.• Register the situation with videos or pictures.• Answer the following questions:– What are people doing? Who participates? Where thissituation happens?– How they do what they do?– Why? What are their motivations? What objectives they tryto achieve?
Why interviewing?• To understand the motivations, thoughts andemotions of the costumer or user. When weunderstand their decisions, atittudes and thereasones they give for what they do, we candesign based on their needs.
How to prepare an interview withcustomers – Steps to Follow1. Identify customer segments to interview.2. Create at least 3 hypothesis of problems that eachsegment faces.3. Define “how many” and “where”. This is, the number ofthe sample and the setting of the interview (werecommend at last 10 interviews).4. Define how you are going to get them.5. Make an interview guideline.6. Develop the intervies.7. Analyze the results.
How to prepare an interview with customers–Identifying segments and building hypothesis• Look for “eary adopters” or “extreme users”,those customers that confront the problem orneed with bigger intensity.• Point out the three main problems that thecustomer faces (the hypothesis).
Not all customers are the same–Hierarchy of customers(S. Blank)They have a problem.They are aware of the problem.They are actively looking for a solution.They improvised a solution.They have budget toadquire a solution.“EarlyAdopters”!
How to prepare an interview with customers- How many do we interview?• At least 10 interviews.• Your not looking for statistical significance,instead you apply a saturation criteria: youinterview until the results repeat each other.
How to prepare an interview withcustomers – Stablish contact• Try to find people you don’t know or that are not yourdirect relatives or friends.• Once you make the first interview, ask the personinterviewed if he can introduce you to other personsthat belong to the customer segment.• You can also make calls or write emails to people youdon´t know, introducing yourself, explaining thepurpose of the interview and asking for time.
How to prepare an interview withcustomers – The guideline• Brainstorm ideas of possible questions.• Identify and order the questions in subjects. Theorder of the questions should help with the flow ofthe interview.• Make sure you provide enough space for “Why?”and follow up questions. Also, have manyquestions like “Tell me about the last time thatyou _____”, and questions about their feelingsregarding the problem.
How to interview• One person at a time.• Questions and objectives have to beprepared beforehand.• Separate behavior from feedback on theproduct in the discussion (researchactions, not just opinions, and get deep inthe problem.• Prepare to listen things that you may notlike (it is not a sale).• Ask for total honesty.• Make open ended questions (avoid yes/no questions).• Listen, don’t talk too much (follow up onthe subjects that may interest thecustomer; short and unskewed questions,don’t fill up silence).• Get deeper (ask “why?” many times).• Repeat to confirm (in any importantsubject, repeat what the person justsaid to confirm or allowing him toclarify the idea). Agradecer.• Ask him to introduce you to morepeople for the next interviews.• Take notes as soon as possible.
Development of the InterviewFuente: Stanford D. School h<p://dschool.stanford.edu/wp-‐content/themes/dschool/method-‐cards/interview-‐for-‐empathy.pdf
For an interview guideline• Have an hipothesis about:– The problem.– How the costumer addresses the problem.– The context.• Make questions:– Do you have this problem?– How do you take care of this problem? Have you findany solution? Are you satisfied with them?– When this problem happens? How does it develop?
ROLE PLAYING • Activity 6 (20 min)1. Individually, elaborate theguideline for an interview,with questions that followthe hipothesis to exploref o r e a c h c u s t o m e rsegment (remember theprevious advice).2. Work in groups of 3 people,where each one is A, B or C.3. A should interview B (thecustomer). C observes theinterview from outside.4. Then, C gives feedback andthey change roles.
Next Steps• Do activities of observation of the context were the customer facesthe problem.• Expected results: pictures or videos that show the existence of aproblem or need.• Do at least 10 interviews with customers.– List problem hypothesis for each customer segment.– Elaborate a guideline for the interview.– Keep record of the interviews and presente results (the hypothesis werepresent, not present, or new problems emerge).• For the next video pitch you should present:– Problem hypothesis for each segment.– Results with evidence of the observations and interviews (pictures,videos and quotes).
What could happen• The problem is real and has a huge importance.• The problem is not so important to the customer or itdoesnt exist.• The problem is seen in other customer segments.• Other problems emerge that are bigger to the customer.You have to verify, not guess, if the customer problem isreal.