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Business Model WorkshopProduct / Market    Tango       Keith McGreggor      Director of VentureLab @   ...
Business Model Generation                    infrastructure              offer              customers                     ...
the Canvas    infrastructure              offer            customers                 activities              relationships...
still fiction...      infrastructure            offer                 customers                   ?             ?  ?       ...
... and we want facts!     infrastructure             offer               customers                   ✔             ✔ ✔   ...
How?
pick one...      infrastructure            offer                 customers                   ?              ?  ?          ...
design experiment ...  offer                 customers                                            A controlled experiment ...
run it in the world ...  offer                 customers           A controlled                                           ...
... and iterate!  offer                 customers           A controlled                                            experi...
innovation             ©2006
the key idea   There are  NO FACTSin the building!                   12
the big secretConduct 100+Interviews                  13
14
A man   who carries  a cat by the    tail learns something he  can learn inno other way.           15
Why do Startups fail?
Startups   don’t failbecause they fail to makesomething...
Startups don’t fail  because they   fail to make   something.Startups failbecause they fail to make  something   someonewa...
Business Model    infrastructure              offer            customers                 activities              relations...
Product / Market Fit    infrastructure              offer            customers                 activities              rel...
“If you build it, he will come...”
Tools for managing       Tools for managing   Engineering Risk            Customer Risk   Waterfall Development           ...
innovationCustomer Discovery
Customer DiscoveryStartups   Companies Search    Execute
Customer Discovery Understand the Problem          then  Develop the Solution
This may sound familiar...Understand the Problem         then                      ... but it’s actually Develop the Solut...
MYTHCustomers wantyour technology.
TRUTH Customers don’t careabout (your) technology.Customers just want their    problem solved.
Customer Discovery  key ideaCustomer POV
Customer Discovery  WHO CARES?WHY will they BUY?
video...
Customer           Gains  JobsProblems Needs             Pains
Customer             Gains  JobsProblems   Archetype Needs               Pains
Something Makeable...             Gain Creators Products& Services              Pain Killers
Value Proposition             Gain CreatorsProducts & Services    MVP              Pain Killers
Product / Market Fit    infrastructure              offer            customers                 activities              rel...
Value PropositionsCustomer Segments   on Markets...kinds of Customers                     38
Value	  Proposi6onWhat Are You Building and For Who?
©	  2012	  Steve	  Blank
a Value Proposition             Gain CreatorsProducts & Services    MVP             MVP              Pain Killers
a Customer Segment            Gains  Jobs     Persona /Problems   Archetype Needs               Pains
Product/Market                 Fit     Gai                    GaiPr   M                      Pe     Pa                    ...
Product/Services
Value	  Proposi6on	  -­‐	  Products• Which are part of your value proposition?  – (e.g. manufactured goods, commodities, p...
Value	  Proposi6on	  -­‐	  Services• Which core services are part of your value proposition?  – (e.g. consulting, a haircu...
Pain	  Killers Reduce or eliminate wasted time, costs,negative emotions, risks - during and after           getting the jo...
Pain	  Killers	  -­‐	  Hypotheses• Produce savings?  – (e.g. time, money, or efforts, …)• Make your customers feel better?...
Pain	  Killer	  –	  Is	  it	  a	  Problem	  or	  Need?• Are you solving a Problem?• Are you fulfilling a Need?• For who?• ...
Pain	  Killer	  -­‐	  Ranking• Rank each pain your products and services kill according  to their intensity for the custom...
Gain	  Creators How do they create benefits the customerexpects, desires or is surprised by, including   functional utilit...
Gain	  Creators-­‐	  Hypotheses• Create savings that make your customer happy?  – (e.g. in terms of time, money and effort...
Gain	  Creator-­‐	  Ranking• Rank each gain your products and services create  according to its relevance to the customer....
Things	  to	  Consider
Value	  Proposi7on	  –	  Common	  Mistakes• It’s just a feature of someone else’s product• It’s a “nice to have” instead o...
Key	  Ques6ons	  for	  Value	  PropProblem Statement: What is the problem?Ecosystem: For whom is this relevant?Competition...
Technical vs Market Insight
Technical vs Market InsightTechnical Insight         Market Insight    Moore’s Law         Value chain disruption   New sc...
Insight ➠ Value Propositions          from Technical Insight             from Market Insight           More Efficient       ...
Customer	  Segments     Who are they?   Why would they buy?
a Customer Segment            Gains  Jobs     Persona /Problems   Archetype Needs               Pains
Jobs	  to	  Be	  Done         Problems/NeedsWhat is the customer segment trying to get done?            Is it a problem or...
Customer	  Segments	  –	  Jobs/Needs• What functional or social jobs are getting done?  – (e.g. perform or complete a spec...
Buyer/Co-­‐Creator/Transferor• Are they a buyers  – (e.g. comparing offers, deciding, buying, taking delivery of a product...
Customer	  Segment	  Jobs	  -­‐	  Rank• Rank each job according to its significance to the  customer.• Is it crucial or is...
Customer	  Painsundesired costs and situations,   risks, negative emotions
Customer	  Segments	  –	  Pains• What do your customers find too costly?  – (e.g. takes a lot of time, costs too much, req...
Customer	  Segments	  –	  Pains• What barriers are keeping customers from adopting?  – (e.g. upfront investment costs, lea...
Customer	  Gains    benefits the customer expects, desires               or is surprised by.includes functional utility, s...
Customer	  Segments	  –	  Gains• Which savings would make your customer happy?  – (e.g. in terms of time, money and effort...
Customer	  Segments	  –	  Gains• What positive social consequences do they desire?  – (e.g. makes them look good, increase...
Customer	  Persona/Archetype
Define	  Customer	  Archetype/Persona• Who are they?  – Position / title / age / sex / role• How do they buy?  – Discretion...
Product/Market Fit          Gai        Gai     Pr   M          Pe          Pa          Pa
on Markets...                76
four kinds of MarketsExistingResegmentedNewClone                        77
ExisFngIncumbents exist, customers can name the marketCustomers want/need better performanceUsually technology drivenPosit...
Resegmented	  ExisFngLow cost provider (Southwest)Unique niche via positioning (Whole Foods)What factors can:• be eliminat...
NewCustomers don’t exist todayHow will they find out about you?How will they become aware of their need?How do you know th...
CloneTakes foreign business model and adapts it to localconditions • Language • Culture • Import restrictions • Local cont...
kinds of CustomersB to BB to CB to B to ... to C                     82
Business to Business (B to B)
What do they want you to do?•   Increase revenue?•   Decrease costs?•   Get them new customers?•   Keep up with or pass co...
Who’s the Customer in a Company?•   User?•   Influencer?•   Recommender?•   Decision Maker?•   Economic Buyer?•   Saboteur...
How Do They Interact to Buy?• Organization Chart• Influence Map• Sales Road Map
Pass/Fail Signals & Experiments•   How do you test interest?•   Where do you test interest?•   What kind of experiments ca...
How Do They Hear About You?• Demand Creation• Network effect• Sales
Business to Consumer (B to C)
What do they want you to do?•   Does it entertain them?•   Does it connect them with others?•   Does it make their lives e...
Consumer Customers• Do they buy it by themselves?• Do they need approval of others?• Do they use it alone or with others?
How Do They Decide to Buy?•   Demand Creation•   Viral?•   SEO/SEM•   Network effect?•   AARRR (Dave McClure)    – the “pi...
Pass/Fail Signals & Experiments•   How do you test interest?•   Where do you test interest?•   What kind of experiments ca...
The Consumer Sales Channel• A product that’s bits can use the web• But getting a physical consumer product into retail  di...
Business to Business to      Consumer     (B to B to C)
Who’s The Customer?• Consumer End Users, Corporate Customers Pay• Multiple Consumers• Etc.
Multiple Customer Segments• Each has its own Value Proposition• Each has its own Revenue Stream• One segment cannot exist ...
exercise: how tointerview a customer                       98
Business Model Workshop: Product Market Tango
Business Model Workshop: Product Market Tango
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Business Model Workshop: Product Market Tango

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Second lecture in a workshop on business model generation and technology startups. Focuses on customer discovery and product market fit.

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Transcript of "Business Model Workshop: Product Market Tango"

  1. 1. Business Model WorkshopProduct / Market Tango Keith McGreggor Director of VentureLab @ ...
  2. 2. Business Model Generation infrastructure offer customers activities relationships partners value segments prop. resources channels financial cost structure revenue streams
  3. 3. the Canvas infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  4. 4. still fiction... infrastructure offer customers ? ? ? activities ? relationships ?partners ? value segments prop. ? ? ? resources channels ? ? financial ? ? cost structure ? revenue streams ? ?
  5. 5. ... and we want facts! infrastructure offer customers ✔ ✔ ✔ activities relationships ✔ ✔partners ✔ value segments prop. ? ✔ ✔ resources channels ✔ ? financial ✔ ✔ cost structure ? revenue streams ? ✔
  6. 6. How?
  7. 7. pick one... infrastructure offer customers ? ? ? activities ? relationships ?partners ? value segments prop. ? ? ? resources channels ? ? financial ? ? cost structure ? revenue streams ? ?
  8. 8. design experiment ... offer customers A controlled experiment ? generally compares the results obtained from an experimental ? relationships ? sample against a control sample, which is practically identical to the experimental ? value segments sample except for the one prop. ? aspect whose effect is being tested (the independent ? variable). channels ? ?financial ? ? revenue streams ?
  9. 9. run it in the world ... offer customers A controlled experiment ? generally compares the ? relationships ? results obtained from an ? value segments prop. ? ? channels ? ?financial ? ? revenue streams ?
  10. 10. ... and iterate! offer customers A controlled experiment generally ✔ compares the ? relationships ? results obtained from an ? value segments prop. ? ? channels ? ?financial ? ? revenue streams ?
  11. 11. innovation ©2006
  12. 12. the key idea There are NO FACTSin the building! 12
  13. 13. the big secretConduct 100+Interviews 13
  14. 14. 14
  15. 15. A man who carries a cat by the tail learns something he can learn inno other way. 15
  16. 16. Why do Startups fail?
  17. 17. Startups don’t failbecause they fail to makesomething...
  18. 18. Startups don’t fail because they fail to make something.Startups failbecause they fail to make something someonewants to buy from them.
  19. 19. Business Model infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  20. 20. Product / Market Fit infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  21. 21. “If you build it, he will come...”
  22. 22. Tools for managing Tools for managing Engineering Risk Customer Risk Waterfall Development ? Porter’s Five Forces SWOT Analysis Project Management Baseline Risk Assessment Stress Testing Concentration MethodologyQuantitative Risk Management ...
  23. 23. innovationCustomer Discovery
  24. 24. Customer DiscoveryStartups Companies Search Execute
  25. 25. Customer Discovery Understand the Problem then Develop the Solution
  26. 26. This may sound familiar...Understand the Problem then ... but it’s actually Develop the Solution the inverse
  27. 27. MYTHCustomers wantyour technology.
  28. 28. TRUTH Customers don’t careabout (your) technology.Customers just want their problem solved.
  29. 29. Customer Discovery key ideaCustomer POV
  30. 30. Customer Discovery WHO CARES?WHY will they BUY?
  31. 31. video...
  32. 32. Customer Gains JobsProblems Needs Pains
  33. 33. Customer Gains JobsProblems Archetype Needs Pains
  34. 34. Something Makeable... Gain Creators Products& Services Pain Killers
  35. 35. Value Proposition Gain CreatorsProducts & Services MVP Pain Killers
  36. 36. Product / Market Fit infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  37. 37. Value PropositionsCustomer Segments on Markets...kinds of Customers 38
  38. 38. Value  Proposi6onWhat Are You Building and For Who?
  39. 39. ©  2012  Steve  Blank
  40. 40. a Value Proposition Gain CreatorsProducts & Services MVP MVP Pain Killers
  41. 41. a Customer Segment Gains Jobs Persona /Problems Archetype Needs Pains
  42. 42. Product/Market Fit Gai GaiPr M Pe Pa Pa
  43. 43. Product/Services
  44. 44. Value  Proposi6on  -­‐  Products• Which are part of your value proposition? – (e.g. manufactured goods, commodities, produce, ...)• Which intangible products are part? – (e.g. copyrights, licenses, ...)• Which financial products? – (e.g. financial guarantees, insurance policies, ...)• Which digital products? – (e.g. mp3 files, e-books, ...)
  45. 45. Value  Proposi6on  -­‐  Services• Which core services are part of your value proposition? – (e.g. consulting, a haircut, investment advice, ...)• Which pre-sales or sales services? – (e.g. help finding the right solution, financing, free delivery service, ...)• Which after-sales services? – (e.g. free maintenance, disposal, ...)
  46. 46. Pain  Killers Reduce or eliminate wasted time, costs,negative emotions, risks - during and after getting the job done
  47. 47. Pain  Killers  -­‐  Hypotheses• Produce savings? – (e.g. time, money, or efforts, …)• Make your customers feel better? – (e.g. kills frustrations, annoyances, things that give them a headache, ...)• Fix underperforming solutions? – (e.g. new features, better performance, better quality, ...)• Ends difficulties and challenges customers encounter? – (e.g. make things easier, helping them get done, eliminate resistance, ...)• wipe out negative social consequences? – (e.g. loss of face, power, trust, or status, ...)...• Eliminate risks – (e.g. financial, social, technical risks, or what could go awfully wrong, ...)
  48. 48. Pain  Killer  –  Is  it  a  Problem  or  Need?• Are you solving a Problem?• Are you fulfilling a Need?• For who?• How do you know?
  49. 49. Pain  Killer  -­‐  Ranking• Rank each pain your products and services kill according to their intensity for the customer.• Is it very intense or very light?• For each pain indicate the frequency at which it occurs
  50. 50. Gain  Creators How do they create benefits the customerexpects, desires or is surprised by, including functional utility, social gains, positive emotions, and cost savings?
  51. 51. Gain  Creators-­‐  Hypotheses• Create savings that make your customer happy? – (e.g. in terms of time, money and effort, ...)• Produce expected or better than expected outcomes? – (e.g. better quality level, more of something, less of something, ...)• Copy or outperform current solutions that delight customer? – (e.g. regarding specific features, performance, quality, ...)• Make your customer’s job or life easier? – (flatter learning curve, usability, accessibility, more services, lower cost of ownership, ...)• Create positive consequences that customer desires? – (makes them look good, produces an increase in power, status, ...).
  52. 52. Gain  Creator-­‐  Ranking• Rank each gain your products and services create according to its relevance to the customer.• Is it substantial or insignificant?• For each gain indicate the frequency at which it occurs.
  53. 53. Things  to  Consider
  54. 54. Value  Proposi7on  –  Common  Mistakes• It’s just a feature of someone else’s product• It’s a “nice to have” instead of a “got to have”• Not enough customers care
  55. 55. Key  Ques6ons  for  Value  PropProblem Statement: What is the problem?Ecosystem: For whom is this relevant?Competition: What do customers do today?Technology / Market Insight: Why is the problem sohard to solve?Market Size: How big is this problem?Product: How do you do it?
  56. 56. Technical vs Market Insight
  57. 57. Technical vs Market InsightTechnical Insight Market Insight Moore’s Law Value chain disruption New scientific Deregulation discoveries Changes in how Typically applies to people work, live andhardware, clean tech interact and what they and biotech expect
  58. 58. Insight ➠ Value Propositions from Technical Insight from Market Insight More Efficient Lower Better cost Better Distribution BundlingSmaller Faster Simpler Better Branding
  59. 59. Customer  Segments Who are they? Why would they buy?
  60. 60. a Customer Segment Gains Jobs Persona /Problems Archetype Needs Pains
  61. 61. Jobs  to  Be  Done Problems/NeedsWhat is the customer segment trying to get done? Is it a problem or a need?
  62. 62. Customer  Segments  –  Jobs/Needs• What functional or social jobs are getting done? – (e.g. perform or complete a specific task, solve a specific problem or trying to look good, gain power or status, ...)• What emotional jobs? – (e.g. esthetics, feel good, security, ...)• What basic needs are you helping your customer satisfy? – (e.g. entertainment, communication, sex, ...)
  63. 63. Buyer/Co-­‐Creator/Transferor• Are they a buyers – (e.g. comparing offers, deciding, buying, taking delivery of a product or service, ...)• Are they co-creators – (e.g. co-designing with solution providers, contributing value to the solution, ...)• Are they transferors – (how customers dispose of a product, transfer it to others, or resell, ...)
  64. 64. Customer  Segment  Jobs  -­‐  Rank• Rank each job according to its significance to the customer.• Is it crucial or is it trivial?• For each job indicate the frequency at which it occurs.• Outline in which specific context a job is done, because that may impose constraints or limitations – (e.g. while driving, outside, ...)
  65. 65. Customer  Painsundesired costs and situations, risks, negative emotions
  66. 66. Customer  Segments  –  Pains• What do your customers find too costly? – (e.g. takes a lot of time, costs too much, requires substantial efforts, ...)• How are current solutions underperforming? – (e.g. lack of features, performance, malfunctioning, ...)• What are the customers main difficulties and challenges? – (difficulties getting things done, resistance, ...)• What’s keeping your customer awake at night? – (e.g. big issues, concerns, worries, ...)
  67. 67. Customer  Segments  –  Pains• What barriers are keeping customers from adopting? – (e.g. upfront investment costs, learning curve, resistance to change, ...)• What makes your customers feel bad? – (e.g. frustrations, annoyances, things that give them a headache, ...)• What risks do customers fear? – (e.g. financial, social, technical risks, or what could go awfully wrong, ...
  68. 68. Customer  Gains benefits the customer expects, desires or is surprised by.includes functional utility, social gains, positive emotions, and cost savings
  69. 69. Customer  Segments  –  Gains• Which savings would make your customer happy? – (e.g. in terms of time, money and effort, ...)• What outcomes do they expect and what would go beyond their expectations? – (e.g. quality level, more of something, less of something, ...)• How do current solutions delight your customer? – (e.g. specific features, performance, quality, ...)• What would make your customer’s job or life easier? – (e.g. flatter learning curve, more services, lower cost of ownership, ...)
  70. 70. Customer  Segments  –  Gains• What positive social consequences do they desire? – (e.g. makes them look good, increase in power, status, ...)• What are customers looking for? – (e.g. good design, guarantees, specific or more features, ...)• What do customers dream about? – (e.g. big achievements, big reliefs, ...)• How does your customer measure success and failure? – (e.g. performance, cost, ...)• What would increase the likelihood of adopting a solution? – (e.g. lower cost, less investments, lower risk, better quality, performance, design, ...)
  71. 71. Customer  Persona/Archetype
  72. 72. Define  Customer  Archetype/Persona• Who are they? – Position / title / age / sex / role• How do they buy? – Discretionary budget (name of budget and amount)• What matters to them? – What motivates them?• Who influences them? – What do they read/who do they listen to?• Draw a Day in the Life of the customer
  73. 73. Product/Market Fit Gai Gai Pr M Pe Pa Pa
  74. 74. on Markets... 76
  75. 75. four kinds of MarketsExistingResegmentedNewClone 77
  76. 76. ExisFngIncumbents exist, customers can name the marketCustomers want/need better performanceUsually technology drivenPositioning driven by product and how much valuecustomers place on its featuresRisks:• Incumbents will defend their turf• Network effects of incumbent• Continuing innovation
  77. 77. Resegmented  ExisFngLow cost provider (Southwest)Unique niche via positioning (Whole Foods)What factors can:• be eliminated that your industry has long competed on?• be reduced well below the industry’s standard?• should be raised well above the industry’s standard?• be created that the industry has never offered? (blue ocean)
  78. 78. NewCustomers don’t exist todayHow will they find out about you?How will they become aware of their need?How do you know the market size is compelling?Which factors should be created that the industry hasnever offered? (blue ocean)
  79. 79. CloneTakes foreign business model and adapts it to localconditions • Language • Culture • Import restrictions • Local control/ownershipNeed market large enough >100 million
  80. 80. kinds of CustomersB to BB to CB to B to ... to C 82
  81. 81. Business to Business (B to B)
  82. 82. What do they want you to do?• Increase revenue?• Decrease costs?• Get them new customers?• Keep up with or pass competitors?• How important is it?
  83. 83. Who’s the Customer in a Company?• User?• Influencer?• Recommender?• Decision Maker?• Economic Buyer?• Saboteur?• Archetypes for each?
  84. 84. How Do They Interact to Buy?• Organization Chart• Influence Map• Sales Road Map
  85. 85. Pass/Fail Signals & Experiments• How do you test interest?• Where do you test interest?• What kind of experiments can you run?• How many do you test?
  86. 86. How Do They Hear About You?• Demand Creation• Network effect• Sales
  87. 87. Business to Consumer (B to C)
  88. 88. What do they want you to do?• Does it entertain them?• Does it connect them with others?• Does it make their lives easier?• Does it satisfy a basic need?• How important is it?• Can they afford it?
  89. 89. Consumer Customers• Do they buy it by themselves?• Do they need approval of others?• Do they use it alone or with others?
  90. 90. How Do They Decide to Buy?• Demand Creation• Viral?• SEO/SEM• Network effect?• AARRR (Dave McClure) – the “pirate” metrics – Acquisition, Activation, Retention, Referral, Revenue
  91. 91. Pass/Fail Signals & Experiments• How do you test interest?• Where do you test interest?• What kind of experiments can you run?• How many do you test?
  92. 92. The Consumer Sales Channel• A product that’s bits can use the web• But getting a physical consumer product into retail distribution is hard• Is Wal-Mart a customer?
  93. 93. Business to Business to Consumer (B to B to C)
  94. 94. Who’s The Customer?• Consumer End Users, Corporate Customers Pay• Multiple Consumers• Etc.
  95. 95. Multiple Customer Segments• Each has its own Value Proposition• Each has its own Revenue Stream• One segment cannot exist without the other• Which one do you start with?
  96. 96. exercise: how tointerview a customer 98

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