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Henrik Berglund - Customer Development for startups

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Customer Development in start-ups, with Boo.com as an example of what may go wrong, Palm Pilot as an example of a demo prototype (early MVP), and Groupon and YouTube as examples of pivots. …

Customer Development in start-ups, with Boo.com as an example of what may go wrong, Palm Pilot as an example of a demo prototype (early MVP), and Groupon and YouTube as examples of pivots.

This presentation is based on the Customer Development theory developed by Steve Blank and Bob Dorf (http://www.steveblank.com), and is based on slides developed by Steve Blank and Bob Dorf (http://www.slideshare.net/sblank/).

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  • 1.     Customer  Development  for  Startups                   Henrik  Berglund   Chalmers  University  of  Technology   Center  for  Business  Innova8on   henber@chalmers.se   www.henrikberglund.com   @khberglund    2013-­‐02-­‐15   1  
  • 2. Presenta8on  based  on                   by  Steve  Blank  and  Bob  Dorf     More  info:  www.steveblank.com  Buy  the  book:  hJp://www.amazon.com/gp/product/0984999302/    
  • 3. Using  slides  from                          developed  by  Steve  Blank  and  Bob  Dorf     hJp://www.slideshare.net/sblank/      
  • 4. Agenda  1.  Startups  (Old  and  new  view)  2.  Business  Models    WS  3.  Customer  Development    WS  
  • 5. Part  1   Startups  (What  We  Used  to  Believe   What  We  Now  Know)  
  • 6. What  We  Used  to  Believe  
  • 7. Startups  are  a  Smaller  Version     of  a  Large  Company  
  • 8. What  We  Now  Know  
  • 9. Startups  Search    Companies  Execute  
  • 10. Startups  ≠  Small  companies  
  • 11. What  We  Used  to  Believe   Strategy  
  • 12.  Start by developing a Business Plan…
  • 13.  …make the financial forecasts…
  • 14.  …then Execute
  • 15. What  We  Now  Know   Strategy    
  • 16. 5-­‐Year  Plans  
  • 17.  Develop and Execute the Business Plan
  • 18. Why?
  • 19. No Business Plan survivesfirst contact with customers
  • 20. “Everybody  has  a  plan  un@l  they  get  punched  in  the  face”      Mike  Tyson  
  • 21. Searching for a Business Model comes before Executing a business plan
  • 22. Business  Models  
  • 23. Solu8on   Unique  Value   Unfair  Advantage   Customer  Segments  Problem   Proposi8on   Not  easily  copied  or  bought   Customers;  Users   Why  you  are  different  and  worth    gecng  aJen8on     Result  customers  want        +  specific  period  of  8me        +  address  objec8ons     Key  Metrics   Acquisi8on   Ac8va8on   Channels        Direct        Distributor   Reten8on        OEM  Alterna8ves   Revenue        Retail   Referral        VAR        Web   Alterna8ves   Early  Adopters   Interview  30-­‐50  customers   Type:   Fixed  Pricing:   Dynamic  Pricing   Cost  Structure   Build  MVP   Ongoing  burn  (fixed  and  variable  costs)   Revenue  Streams   Asset  sales   Usage  fee   List  price   Product  feature   Nego8a8on   Yield  management   Subscrip8on  fees   Customer  segment   Real-­‐8me  market   Lending/Ren8ng/Leasing   Volume   Licensing   Brokerage  fees   Adver8sing  
  • 24. Search   Execu@on   Business  Model     Opera@ng  Plan  +  Strategy   Hypotheses   Financial  Model  
  • 25. What  We  Used  to  Believe   Process  
  • 26. We  Built  Startups  by    Managing  Processes   Product  Management   +   Waterfall  Engineering  
  • 27. Tradi8onal  Development  Process   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship  
  • 28. Tradi8onal  Development  Process   Has  Two  Implicit  Assump8ons  Customer  Problem:  known   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship  Product  Features:  known   Works  well  for  incremental  development  projects   targe@ng  exis@ng  customers.  
  • 29. Tradi8on  –  Hire  Marke8ng   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   -­‐   Create  Marcom     -­‐  Hire  PR  Agency   -­‐  Create  Demand  Marke@ng      Materials   -­‐  Early  Buzz   -­‐  Launch  Event   -­‐  Create  Posi@oning   -­‐  “Branding”  
  • 30. Tradi8on  –  Hire  Sales   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   -­‐   Create  Marcom     -­‐  Hire  PR  Agency   -­‐  Create  Demand  Marke@ng      Materials   -­‐  Early  Buzz   -­‐  Launch  Event   -­‐  Create  Posi@oning   -­‐  “Branding”   -­‐  Hire  Sales  VP   -­‐  Build  Sales  Sales   -­‐  Hire  1st    Sales  Staff   Organiza@on  
  • 31. Tradi8on  –  Hire  Business  Development   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   -­‐   Create  Marcom     -­‐  Hire  PR  Agency   -­‐  Create  Demand  Marke@ng      Materials   -­‐  Early  Buzz   -­‐  Launch  Event   -­‐  Create  Posi@oning   -­‐  “Branding”   -­‐  Hire  Sales  VP   -­‐  Build  Sales  Sales   -­‐  Hire  1st    Sales  Staff   Organiza@on  Business     -­‐  Hire  First  Bus  Dev   -­‐  Do  deals  for  FCS  Development  
  • 32. Example  -­‐  Recognize  these?   Online  clothes  retailer  specialized  in   fashion  and  sports  (e.g.  Adidas,  Fila,  Vans,   Converse,  DKNY  and  Fred  Perry).     Raised  $160  million  (JP  Morgan,  Goldman   Sachs,  Bernard  Arnault,  BeneJon  +  six).   Developed  an  innova8ve  site  with  3D,   zoom,  360⁰  rota8on  and  virtual   mannequins,  powered  by  lots  of  JavaScript   and  Flash  Anima8ons.   Rapidly  grew  to  420  people  and  spent   heavily  on  PR  pre  launch.   Delayed  launch  repeatedly  due  to   technological  problems.   Finally  launched  in  18  countries   simultaneously    8:59  November  3  1999  EST.  
  • 33. What  happened?  40  %  of  visitors  could  not  access  the  site.      “Eighty-­‐one  minutes     to  pay  too  much  money  Mac  users  could  not  operate  the  site  at  all.     for  a  pair  of  shoes  that  I  The  site  was  very  difficult  to  use  and  full  of   am  s8ll  going  to  have  to  errors,  oren  causing  computers  to  freeze.       wait  a  week  to  get?”  Extremely  slow  to  load  without  broadband.  Only  one  in  four  aJempts  to  make  a  purchase  worked.    Low  conversion  rates  (0.25%).  Conversion  rates  did  double  by  Christmas.  30%  returns,  not  10%  as  projected.  A  “low-­‐bandwidth  version”  was  relaunched  within  months.  But  low  sales  +  high  costs   =>  Bankruptcy.  
  • 34. Validated  Business  Model?  "Our  strong  investor  base  offers  a  solid  founda@on  for  boo.com.  The  fact  that  such  interna@onal  investors  have  invested  in  boo.com  reflects  the  power  of  our  business  model  and  the  boo.com  brand."      Patrik  Hedelin,  Execu2ve  Chairman.  (Press  Release,  Nov  3  1999)  
  • 35. The  problem  –  untested  assump8ons!   Value    proposi@on   Customer   Key  ac@vi@es   Fashion  and  sports  online,   rela@onships   Partnering,     Realis@c  shopping  experience,   Paid  &  Earned  Media   E-­‐commerce,   “Life-­‐s@le  choice”   Visitor  numbers,   Global  taxes  &   .   Conversion  rates   payments,       Customer   Marke@ng       segments  Key  partners  Brands,  Warehouses,   Visualiza@on  of   “young,  well-­‐off,   fashion-­‐  conscious   18  to  24  year  olds”  Logis@cs     the  business         model  framwork   Cost  structure   Revenue     Key   Channels   Streams   Call  centres,   Buying  online,   resources   Online  sales/  full  retail   Return  rates,   Channel  conflicts,   price,   Developers,   Inventory   Zone  pricing   Risk  capital   CAC  &  Life@me  Value  
  • 36. What’s  wrong  with  this  picture?   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   •  Both  Customer  Problems  and  Product  Features   are  hypotheses   •  Emphasis  on  execu8on  rather  than  learning  and   discovery   •  No  relevant  milestones  for  marke8ng  and  sales   •  Oren  leads  to  premature  scaling  and  a  heavy   spending  hit  if  product  launch  fails     You  do  not  know  if  you  are  wrong  un@l  you   are  out  of  money/business  
  • 37. Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   -­‐   Create  Marcom     -­‐  Hire  PR  Agency   -­‐  Create  Demand  Marke@ng      Materials   -­‐  Early  Buzz   -­‐  Launch  Event   -­‐  Create  Posi@oning   -­‐  “Branding”   -­‐  Hire  Sales  VP   -­‐  Build  Sales  Sales   -­‐  Hire  1st    Sales  Staff   Organiza@on  Business     -­‐  Hire  First  Bus  Dev   -­‐  Do  deals  for  FCS  Development  
  • 38. What  We  Now  Know   Process    
  • 39. More startups fail froma lack of customers than from afailure of product development
  • 40. Because  •  We  have  processes  to  manage     product  development    •  We  have  no  process  to  manage     customer  development    
  • 41. An  Inexpensive  Fix  
  • 42. Focus  on  Customers  and  Markets  from  Day   One!   Value proposition Key activities Customer relationships CustomerKey partners segments Visualiza@on  of   the  business   model  framwork   Cost Key Channels Revenue structure resources streams
  • 43. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments   Key  Metrics   Channels   Cost  Structure   Revenue  Streams  
  • 44. How?  
  • 45. Product  and  Customer  Development   Product Development Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   + Customer Development Customer Customer Customer Company Discovery Validation Creation Building
  • 46. Product  and  Customer  Development   Problem:  unknown   Solu8on:  unknown  
  • 47. Search   Execu@on  Strategy   Business  Model     Opera8ng  Plan  +   Hypotheses   Financial  Model  Process   Customer  &   Product  Management   &  Waterfall  Development   Agile  Development  
  • 48. What  We  Used  to  Believe  Organiza@on  
  • 49. Hire and Build aFunctional Organization
  • 50. What  We  Now  Know  Organiza@on  
  • 51. Founders run a Customer Development TeamNo sales, marketing and business development
  • 52. Search   Execu@on   Strategy   Business  Model     Opera8ng  Plan  +   Hypotheses   Financial  Model   Customer  Development,   Product  Management   Process   Agile  Development   Agile  or  Waterfall  Development   Customer     Func@onal  Organiza@on  Organiza@on   Development  Team,      by  Department   Founder-­‐driven  
  • 53. search   execu8on  
  • 54. Part  2  Business  Models  
  • 55. What’s  a  Company?  
  • 56. What’s  a  Company?   A  business  organiza@on,  which  sells  a  product  or  service  in  exchange  for  revenue   and  profit  
  • 57. How  are  Companies  organized?  
  • 58. How  are  Companies  organized?   Companies  are  organized  around               Business  Models  
  • 59. How  are  Companies  organized?  Companies  are  organized  around  Business   Models  
  • 60. What’s  a  Startup?  
  • 61. What’s  a  Startup?   A  temporary  organiza8on     designed  to  search    for  a  repeatable  and  scalable  business  model  
  • 62. What’s  a  Startup?   A  temporary  organiza8on     designed  to  search    for  a  repeatable  and  scalable  business  model  
  • 63. What’s  a  Startup?   A  temporary  organiza8on     designed  to  search    for  a  repeatable  and  scalable  business  model  
  • 64. The  goal  is  not  to  remain  a  startup   Large   Startup   Transi@on   Company  The  goal  of  a  startup  is  to  become  a  large  company!   Failure  =  failure  to  transi@on.  
  • 65. Business  Models   Key activities Value Customer proposition relationshipsKey partners Customer segments Cost Key Channels Revenue structure resources streamshJp://www.businessmodelalchemist.com/  
  • 66. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 67. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 68. Customers  and  problems  Who  is  the  customer?  Mul8-­‐sided  market?  Different  from  user?  hJp://www.businessmodelalchemist.com/2012/08/achieve-­‐product-­‐market-­‐fit-­‐with-­‐our-­‐brand-­‐new-­‐value-­‐proposi8on-­‐designer.html  
  • 69. Customers  and  problems   -­‐  jobs  to  be  done  What  func8onal  jobs  is  your  customer  trying  get  done?  (e.g.  perform  or  complete  a  specific  task,  solve  a  specific  problem…)    What  social  jobs  is  your  customer  trying  to  get  done?  (e.g.  trying  to  look  good,  gain  power  or  status…)    What  emo8onal  jobs  is  your  customer   “What  jobs  are  the  customers  you  are  trying  get  done?  (e.g.  esthe8cs,  feel  good,   targe2ng  trying  to  get  done”  security…)  
  • 70. Customers  and  problems   -­‐  customer  pains  What  does  your  customer  find  too  costly?  (e.g.  takes  a  lot  of  8me,  costs,  effort)      What  makes  your  customer  feel  bad?      (e.g.  frustra8ons,  annoyances)      How  are  current  solu8ons  under-­‐performing  for  your  customer?                            (e.g.  lack  of  features,  performance,  malfunc8on)     “What  are  the  costs,  nega2ve  emo2ons,  bad     situa2ons  etc.  that  your  customer  risks  What  nega8ve  social  consequences  does   experiencing  before,  during,  and  a>er  ge?ng  your  customer  encounter  or  fear?                   the  job  done.”  (e.g.  loss  of  face,  power,  trust,  or  status)    
  • 71. Customers  and  problems   -­‐  customer  gains  Which  savings  would  make  your  customer  happy?  (e.g.  in  terms  of  8me,  money  and  effort)    What  would  make  your  customer’s  job  or  life  easier?  (e.g.  flaJer  learning  curve,  more  services,  lower  cost  of  ownership)    What  posi8ve  social  consequences  does  your  customer  desire?  (e.g.  makes  them  look  good,  increase  in  power,  status)   “What  are  the  benefits  your  customer     expects,  desires  or  would  be  surprised  by.”  What  are  customers  looking  for?  (e.g.  good  design,  guarantees,  features)    What  do  customers  dream  about?  (e.g.  big  achievements,  big  reliefs)  
  • 72. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 73. Unique  Value  Proposi@ons/Solu@on  What  are  your  products  and  services?    How  do  they  create  value  for  the  customer  segments?  
  • 74. Unique  Value  Proposi@ons/Solu@on  Can  your  product/service:    •  Produce  savings?  •  Make  your  customers  feel   beJer?    •  Put  an  end  to  difficul8es?  •  Wipe  out  nega8ve  social   consequences?  
  • 75. Unique  Value  Proposi@ons/Solu@on  Can  your  product/service:    •  Outperform  current   solu8ons?    •  Produce  outcomes  that  go   beyond  their  expecta8ons?    •  Make  your  customer’s  job   or  life  easier?    •  Create  posi8ve  social   consequences?        
  • 76. Product  Market  Fit  Gecng  this  right  is  essen8al!  
  • 77. Product  Market  Fit  Gecng  this  right  is  essen8al!  
  • 78. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 79. How  Do  You  Want  Your  Product  to  Get  to   Your  Customer?   " Yourself " Through someone else " Retail " Wholesale " Bundled with other goods or services 82  
  • 80. Web  Channels   83  
  • 81. Physical  Channels   84  
  • 82. How  Does  Your  Customer  Want  to  Buy   Your  Product  from  your  Channel?   " •  Same day " •  Delivered and installed •  Downloaded " •  Bundled with other " products " •  As a service •  … " 85  
  • 83. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 84. Customer  Rela@onships  
  • 85. Customer  Rela@onships  
  • 86. Problem   Solu8on   Unique  Value   Unfair     Customer     Proposi8on   Advantage   Segments  What  are  you  customers’   Key  features   Single,  clear,  compelling     That  can’t  be  easily     Who  are  your  customers?  key  jobs/pains/gains?     message  that  states  why     bought,  or  imitated?     MVP   you  are  different  and       Who  are  earlyvangelists?   worth  buying  from     Key  Metrics   Channels   What  metrics  are     How  do  you  reach     most  cri8cal     customers?   to  track?     Cost  Structure   Revenue  Streams   Customer  Acquisi8on  Costs     Revenue  Model   Distribu8on  Costs   Life  Time  Value     Hos8ng   Revenue/pricing   People   etc.   etc.       Fixed/variable  
  • 87. WS  
  • 88. Map  out  your  Business  Model?   60  minutes  
  • 89. Be  clear  about  Product  Market  Fit!  
  • 90. Part  3  Customer  Development  
  • 91. To  repeat  
  • 92. To  repeat   More  startups  fail  from     a  lack  of  customers  than  from  a  failure  of  product  development…  
  • 93. …  because  they  think  startups  =  small  companies…  
  • 94. …they  focus  on  execu8ng  the  plan…   Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   •  Both  Customer  Problems  and  Product  Features   are  hypotheses   •  Emphasis  on  execu8on  rather  than  learning  and   discovery   •  No  relevant  milestones  for  marke8ng  and  sales   •  Oren  leads  to  premature  scaling  and  a  heavy   spending  hit  if  product  launch  fails     You  do  not  know  if  you  are  wrong  un@l  you   are  out  of  money/business  
  • 95. …  so  they  scale  on  untested  assump8ons…  
  • 96. …  and  end  up  going  bust.  “We  have  been  too  visionary.  We  wanted  everything  to  be  perfect,  and  we  have  not  had  control  of  costs"      Ernst  Malmsten  (BBC  News,  May  18  2000)  
  • 97. So  what  to  do?  
  • 98. Focus  on  Customers  and  Markets  from  Day   One!   Value proposition Key activities Customer relationships CustomerKey partners segments Visualiza@on  of   the  business   model  framwork   Cost Key Channels Revenue structure resources streams
  • 99. Product  and  Customer  Development   Product Development Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   + Customer Development Customer Customer Customer Company Discovery Validation Creation Building
  • 100. Product  and  Customer  Development   Problem:  unknown   Solu8on:  unknown  
  • 101. Customer  Development:  Key  Ideas  •  Parallel  process  to  Product  Development  (agile)  •  Measurable  checkpoints  not  @ed  to  FCS  but  to  customer   insights  •  Emphasis  on  itera@ve  learning  and  discovery  before  execu@on  •  Must  be  done  by  small  team  including  CEO/project  leader  
  • 102. Customer  Development  Heuris8cs  •  There  are  no  facts  inside,  so  get  out  of  the  building!    •  Develop  for  the  few,  not  for  the  many  •  Earlyvangelists  make  your  company,  and  are  smarter  than  you!  •  Develop  a  minimum  viable  product  to  maximize  fast  learning.  •  Nail  it  before  you  scale  it  –  low  burn  by  design!  
  • 103. Customer  Development:  Four  Stages   search   execu8on   •  Customer  Discovery        Ar8culate  and  Test  your  Business  Model  Hypotheses   •  Customer  Valida@on        Sell  your  MVP  and  Validate  your  MB  &  Sales  Roadmap   •  Customer  Crea@on          Scale  via  relentless  execu8on  and  fill  the  sales  pipeline   •  Company  Building        (Re)build  company’s  organiza8on  &  management  
  • 104. Customer Discovery•  Articulate and test your BM hypotheses•  No selling, just listening•  Must be done by CEO/ project manager
  • 105. building building block block building block building buildingbuilding block block block building block building building block block build g ing building buildin block block block
  • 106. But,  Realize  it’s  just  Hypotheses!  
  • 107. GuessGuess Guess Guess Guess Guess Guess Guess Guess
  • 108. Test Customer Problem Hypotheses”Do  you  have  this      problem?”      1.          2.          3.          
  • 109. Test Customer Problem Hypotheses”Do  you  have  this    ”Tell  me  about  it,  how      problem?”    do  you  solve  it  today?”    1.        1.        2.        2.        3.        3.        
  • 110. Test Customer Problem Hypotheses”Do  you  have  this    ”Tell  me  about  it,  how    ”Does  something  like  this  problem?”    do  you  solve  it  today?”  solve  your  problem?”  1.        1.      1.  2.        2.      2.  3.        3.      3.  Listen  carefully  to  what  they  say  at  each  step!    Focus  on  learning  -­‐  Don’t  try  to  sell  them  on  your  idea!    In  the  process  you  find  out  about  other  BM  parts  as  well:  workflow,  benefits  (to  users  &  others),  preferred  channels,  cri@cal  influencers,  respected  peers  etc…    You  want  to  become  a  domain  expert!  
  • 111. Finding  people  Introduc8ons  (ask  everyone  you  know)    •  Provide  the  exact  text  that  they  can  copy  and  paste  into   a  tweet  or  email  (They’re  doing  you  a  favor!  Make  it  as   easy  as  possible  for  them)  •  Tell  them  exactly  how  you  are  going  to  communicate   with  their  contacts  (They’re  risking  a  bit  of  social  capital   for  you.  Be  very  clear  that  you  won’t  spam  or  annoy   people)  •  Tell  them  your  goals  (What  do  you  think  you’ll  get/learn   if  they  make  this  intro  for  you?  People  want  to  know   that  they’re  contribu8ng  to  a  bigger  picture!)    
  • 112. Finding  people   AdWords,  Facebook  Ads,  Promoted  Tweets     Summarize  your  idea  and  get  it  in  front  of  people  who   have  expressed  an  interest  in  it  by  having  searched  for   your  keywords  and  clicked  your  ad  –  get  conversa8ons   (and/or  test  hypotheses  using  landing  pages).      hJp://www.cindyalvarez.com/best-­‐prac8ces/customer-­‐development-­‐interviews-­‐how-­‐to-­‐finding-­‐people  
  • 113. Finding  people  TwiJer  Search    Look  for  people  who  have  already  discussed  a  similar  product,  problem,  or  solu8on  and  address  a  tweet  directly  to  them:     “@username  Would  love  yr  feedback  on  [product/ problem/solu2on]  –  shd  only  take  2mins  [URL]  thanks!”  
  • 114. Finding  people  Google  Alerts    Set  up  Google  Alerts  for  your  product/problem/solu8on  –  when  it  finds  relevant  blog  posts  or  comments,  email  and  ask  for  feedback:     “I  read  your  [post/comment]  about  [product/problem/ solu2on].    I’m  currently  working  on  a  related  idea  and  I   think  your  opinion  would  be  very  valuable  to  me  –  could   you  take  2  minutes  and  check  out  [URL]?    Thank  you  –   I’d  be  happy  to  return  the  favor  any  2me.”      
  • 115. Interview  8ps  hJp://www.giffconstable.com/2011/07/12-­‐8ps-­‐for-­‐customer-­‐development-­‐interviews-­‐revised/  
  • 116. Web  Much  faster  to  build  =>    get  quan8ta8ve  feedback  sooner.    Use  a  low-­‐fi  landing  page  as  subs8tute  for  (and  introduc8on  to)  conversa8ons.    Key  to  drive  traffic  through  AdWords/Facebook  Ads/Promoted  Tweets  etc.    Build  (design  test),  measure  (run  test)  and  analyze  (evaluate  test)!    
  • 117. Landing  page  design  hJp://blog.kissmetrics.com/landing-­‐page-­‐blueprint/  
  • 118. Reality check!  CustDev  and  ProdDev  teams  meet  and  discuss  the  lessons  learned  from  the  field.     ”Here  is  what  we  thought  about  customers  and   their  problems,  here  is  what  we  found  out”    BM  hypotheses,  product  specs  or  both  are  jointly  revised.    
  • 119. Test  Solu8on  Hypothesis  1)  ”We  believe  you  have  this  important  problem”        –  listen  (check).      2)  Demo  how  your  product  solves  the  problem.  Focusing  on  a  few  key  features.    Include  workflow  story:  ”life    before  our  product”  and    ”life  arer  our  product”  –  listen!    3)  ”What  would  this  solu8on  need  to  have  for  you  to  purchase  it?”  Listen,  ask  follow  up  ques8ons.  
  • 120. “A  new  way  for  people  to  pay  for  train  8ckets  at  rail  sta8ons  using  an  electronic  payment  service,  like  PayPal,  on  their  mobile  phone.”  
  • 121. Dropbox  •  1st  solu8on  test:  a  three  minute  video  made  in  the   founder’s  apartment  before  a  complete  code  was   wriJen.   –  Generated  valuable  feedback  from  visionary  customers.  •  2nd  solu8on  test:  another  video  of  the  product  that  was   posted  on  a  social  network.   –  Wai8ng  list  jumped  from  5  000  to  75  000.  •  Dropbox’s  original  intent  was  to  build  and  ship  their   product  in  eight  weeks.    •  Instead,  they  gathered  feedback  and  launched  a  public   version  18  months  later.  
  • 122. Test Product Hypotheses  Arer  demoing,  ask  about  other  things:     Posi8oning  –  how  do  they  describe  the  product?   Product  category  (new,  exis8ng,  resegmented)   Compe8tors   Features  needed  for  first  version   Preferred  revenue  model   Pricing   Addi8onal  service  needs   Marke8ng  –  how  do  they  find  this  type  of  product?   Purchasing  process   Who  has  a  budget?   etc.  
  • 123. Web  Build  out  a  high-­‐fidelity  web  page  with  “func8oning”  back-­‐end,  based  on  lessons  learned.      “Mechanical  Turk”-­‐solu8on.    Ask  for  money:  first  “pre-­‐order”  then  charging.    Con8nue  to  test,  measure  and  analyze!    
  • 124. Reality check!  CustDev  and  ProdDev  teams  meet  and  discuss  the  lessons  learned.     ”Here  is  what  we  thought  about  product   features  and  here  is  what  we  found  out”    BM  hypotheses,  product  specs  or  both  are  again  jointly  revised.  
  • 125. Customer  Discovery:  Exit  Criteria   Consistent  answers  from  “enough”  people?   What  are  your  customers  top  problems?   How  much  will  they  pay  to  solve  them?   Does  your  product  concept  solve  them?   Do  customers  agree?     How  much  will  they  pay  for  it?  When?   Can  you  draw  a  day-­‐in-­‐the-­‐life  of  a  customer?   Before  &  arer  your  product   Can  you  draw  the  org  charts  of  users,  buyers   and  channels?    
  • 126. Customer Validation•  Develop  and  sell  MVP  to  passionate  earlyvangelists  •  Validate  a  repeatable  sales  roadmap  •  Verify  the  business  model  
  • 127. Minimal  Viable  Product  Based  on  your  insights  from  Customer  Discovery,  sell  the  smallest  feature  set  customers  are  willing  to  pay  for!     •  Purpose  1:  Reduce  wasted  engineering  hours      (and  wasted  code)     •  Purpose  2:  Get  something  into  the  hands  of   earlyvangelists  as  soon  as  possible  =>  maximize   learning!  (cf.  landing  page)  
  • 128. The  Apple  I,  Apple’s  first  product,  was  sold  as  an  assembled  circuit  board  and  lacked  basic  features  such  as  a  keyboard,  monitor,  and  case.    
  • 129. The  owner  of  this  unit  added  a  keyboard  and  a  wooden  case.  hJp://en.wikipedia.org/wiki/Apple_Inc.  
  • 130. Minimal  Viable  Product   The  MVP  is  not  the  goal  =  Requires  commitment   to  itera8on!     •  “A  complex  system  that  works  is  invariably   found  to  have  evolved  from  a  simple  system   that  worked.”     •  “A  complex  system  designed  from  scratch   never  works  and  cannot  be  made  to  work.   You  have  to  start  over,  beginning  with  a   working  simple  system.”  John  Gall  System-­‐an8cs:  How  Systems  Really  Work  and  Especially  How  They  Fail  
  • 131. Types  of  earlyvangelists     Not     helpful   1.  Has  a  problem   2.  Understands  he  or  she  has  a  problem   3.  Ac8vely  searching  for  a  solu8on   4.  Cobbled  together  an  interim  solu8on   5.  CommiJed  and  can  quickly  fund  a  solu8on   Jackpot!  
  • 132. Customer  Valida8on:  Exit  Criteria   Do  you  have  a  proven  sales  roadmap?   Organiza8on  chart?  Influence  map?   No  staffing  un8l  roadmap  is  proven!     Do  you  understand  the  sales  cycle?   LTV,  CAC,  ROI  for  customers  etc.     Do  you  have  a  set  of  orders  ($’s)  of  the   product  valida8ng  the  roadmap?     Is  the  business  model  scalable?   LTV  >  CAC  
  • 133. If  yes  –  Start  execu8ng  
  • 134. If  no  –  Pivot!   •   The  heart  of  Customer  Development   •   Change  without  crisis        (and  without  firing  execu8ves)  “The  idea  that  successful  startups  change  direc2ons  but  stay  grounded  in  what  theyve  learned”  
  • 135. YouTube - Customer Need Pivot
  • 136. Pivot   Adapt  the  Business  Model   un8l  you  can  prove  it   works  
  • 137. search   execu8on  
  • 138. Customer  Crea8on  •  Grow  customers  from  few  to  many  •  Comes  arer  proof  of  sales  •  Inject  $’s  for  scale  •  This  is  where  you  “cross  the  chasm”    
  • 139. Company Building•  (Re)build  company’s  organiza8on  &  management  •  Dev.-­‐centric  ⇒  Mission-­‐centric  ⇒  Process-­‐centric  
  • 140. Summary  –  Customer  Development   •  Customer  Discovery        Ar8culate  and  Test  your  Business  Model  Hypotheses   •  Customer  Valida@on        Sell  your  MVP  and  Validate  your  BM  &  Sales  Roadmap   •  Customer  Crea@on          Scale  via  relentless  execu8on  and  fill  the  sales  pipeline   •  Company  Building        (Re)build  company’s  organiza8on  &  management  
  • 141. Don’t  do  a  Boo!  Concept   Product  Dev.   Alpha/Beta   Launch/   Test   1st  Ship   “We  have  been  too  visionary.  We   wanted  everything  to  be  perfect,  and   we  have  not  had  control  of  costs"       Ernst  Malmsten   (BBC  News,  May  18  2000)  
  • 142. WS  
  • 143. Develop  a  Customer  Discovery  Plan?  •  What  are  the  key  ques8ons  I  need  answered?   –  (hint:  customers,  problems)  •  Who  do  I  need  to  talk  with?  •  How  will  I  get  them  to  talk  to  me?  •  When  will  this  happen?  •  How  will  I  know  I  am  done?   –  With  problem  discovery?   –  With  solu8on  discovery?  
  • 144. Tips    •  Each  team  learns  and  evaluates  a  tool,  and   then  reports  back  to  the  whole  group:   –  CrazyEgg.com   –  KISSMetrics   –  Unbounce   –  Qualaroo   –  Marketo.com    
  • 145. Presenta8on  based  on                   by  Steve  Blank  and  Bob  Dorf     More  info:  www.steveblank.com  Buy  the  book:  hJp://www.amazon.com/gp/product/0984999302/    
  • 146. Using  slides  from                          developed  by  Steve  Blank  and  Bob  Dorf     hJp://www.slideshare.net/sblank/      

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