Advanced Entrepreneurship:
Customer Development in High Tech




      Introduction to the Course

                Steve B...
You Are Here

       Plan                                                                    Liquidity


                 ...
You Are Here

       Plan                                                                    Liquidity


                 ...
How do You Get Here

       Plan                                                                    Liquidity


          ...
Entrepreneurship



                   Logical
                   Process




Customer Development in the High-Tech Enterp...
Entrepreneurship



                   Logical
                   Process
                                        Intuitiv...
Today


Part 1: Introduction to the Course


Part 2: Key Concepts
Course Introduction
       !   Course Objectives
       !   Intro and Backgrounds
       !   How the Class Works
       ! ...
Course Objectives

!   Learn how to:
    "   Reduce product/market risk
    "   Organize sales, marketing and business
   ...
Course Prerequisites

!   Officially – none
!   Realistically:
    "   Experience in bringing a new product to market
    ...
Introduction and Backgrounds
!   Steve Blank
!   Guest Speakers
!   Class




       Customer Development in the High-Tech...
Introduction: Steve Blank
                    8 startups in 25 years

2 strikeouts               Rocket Science, Ardent
2 ...
Introduction: Class
Why are you taking the class?

!   How many of you have:
    "   Been in start-ups?
    "   Been in a ...
How the Class Works
!   Syllabus
!   3 Application Exercises
     " Individual projects

     " Max 2-pages

     " Use di...
Class Issues
!   “Tech-heavy”
!   “Enterprise-heavy”
!   For-profit versus non-profit
!   Startups versus existing compani...
Customer Development
in the High Tech Enterprise




         Logistics

          Steve Blank
       sblank@kandsranch.com
How the Class Works
                                           Part 1
                Class                        Case   ...
How the Class Works
                                           Part 1
                Class                        Case   ...
How the Class Works
                                           Part 1
                Class                        Case   ...
How the Class Works
                                           Part 1
                Class                        Case   ...
How the Class Works
                                            Part 1
                 Class                        Case ...
How the Class Works
                                         Part 2

                Class                    Case        ...
How the Class Works
                                         Part 2

                Class                    Case        ...
How the Class Works
                                         Part 2

                Class                    Case        ...
How the Class Works
                                         Part 2

                Class                    Case        ...
How the Class Works
                                         Part 2

                Class                    Case        ...
Reading

Class Text:       Four Steps to the Epiphany
Assigned Reading: In Reader
Blogs:            www.steveblank.com
   ...
Angel/Study.net
               http://bcangel.gsb.columbia.edu

!   All materials are on Angel/Study.net
    "   Syllabus
...
Customer Development
in the High Tech Enterprise




       The Course

          Steve Blank
       sblank@kandsranch.com
Customer Development
!   Business Plans
!   The Value of “Models” for an Entrepreneur
!   Key Concepts
    "   Market vers...
The Top Lies of Venture Capitalists

1.   “I liked your company, but my partners didn't.”
2.   “If you get a lead, we will...
The Top Lies of Entrepreneurs

1.    “Our projections are conservative.”
2.    “(Big name research firm) says our market w...
One Way to Plan a Startup




Customer Development in the High-Tech Enterprise   Fall 2009
Business Plans – Why?

!   Why write a plan?
    "   VC’s require it
    "   Planning (Strategic/Financial/Ops)
    "   Ar...
The Value of “Models”
!   Model = shorthand for complicated idea

    "   Check to see if the results are static or dynami...
Timmons Model of Entrepreneurship
                    (The Business Plan)

                             Communication


  ...
Moore Model of Entrepreneurship
                  (Chasm + Life Cycle)




   Customer Development in the High-Tech Enterp...
New Product Introductions
                             What’s the Model?

!   New Product introduction models
    "   Chec...
StageGate™ Model
            (New Product Introduction)




Customer Development in the High-Tech Enterprise   Fall 2009
Customer Development in the High-Tech Enterprise   Fall 2009
Steve Blank Model of
       Entrepreneurship)




Customer Development in the High-Tech Enterprise   Fall 2009
Venture Capital Model of a Startup
                              (Execution)



Concept/              Product             ...
New Product Introduction
                      It Doesn’t Always Work


!   New Product Development Process
    " Works gr...
Issues in New Product Intros

!   Current models:
     "   Confuse product development process with
         customer need...
Product Development - Microsoft
           Unit of progress: Advance to Next Stage

                                  Wate...
Product Development - Startup
  Assumes Customers and Markets are Understood


                             Agile (XP)!

“...
Product Development - Lean Startup
                 Assumes Customers and Markets are Unknown

                       Cust...
The Lean Startup Model
              Agile Product Development



                                      !   Continuous cyc...
The Lean Startup Model
               Customer Development

                                   !   Continuous cycle of
   ...
Lean Startup Principles
Extraordinary Value at Low cost in Little Time



                             !   Leverages:
 Cus...
The Lean Startup Model
Customer Development Parallels Agile Development


                       Agile Development

    Co...
Customer Development
    Turns Market Risk/Product Fit Hypothesis into Facts

          Customer        Customer         C...
Lean Startup Advantages
                                                                  Customer
                       ...
The Value of “Models”

!   Model = shorthand for complicated idea

!   This class teaches a “model” for product
    introd...
Customer Development
                      Product Development

Concept/             Product            Alpha/Beta        ...
Customer Development


This is what our class is about



    Customer           Customer              Customer           ...
Customer Development
in the High Tech Enterprise


        Key Concepts

            Steve Blank
         sblank@kandsranc...
Class 2: Agenda

       !   Vertical Markets
       !   Market Risk vs. Invention Risk
       !   Case: In N Out
       ! ...
New Product Conundrum

!   New Product Introduction methodologies
    sometimes work, yet sometimes fail
    "   Why?
    ...
Startup Checklist – 1
          What Vertical Market am I In?

!   Web 2.0                                !   Semiconducto...
A Plethora of Opportunities




Customer Development in the High-Tech Enterprise   Fall 2009
Market Risk vs. Invention Risk




  Customer Development in the High-Tech Enterprise   Fall 2009
Startup Checklist - 2

!   Market Risk?
!   Technical Risk?
!   Both?




       Customer Development in the High-Tech Ent...
Startup Checklist - 3

!   Opportunity                       Where does the idea come from?
!   Innovation                ...
Execution: Lots to Worry About




  Customer Development in the High-Tech Enterprise   Fall 2009
Execution: Very Different by Vertical




     Customer Development in the High-Tech Enterprise   Fall 2009
Market Risk Reduction Strategy




  Customer Development in the High-Tech Enterprise   Fall 2009
In-N-Out Case
In-N-Out Secret Menu
!   X by Y                                            !   Grilled Cheese
     "   X meat patties and ...
In-N-Out Meat Factory




Customer Development in the High-Tech Enterprise   Fall 2009
So Why Are We Talking About This?



        Existing Market         Resegmented            New Market
                   ...
Three Types of Markets

    Existing Market           Resegmented          New Market
                                 Mar...
Three Types of Markets

         Existing Market           Resegmented          New Market
                               ...
Definitions: Three Types of Markets
                 Existing Market         Resegmented         New Market
              ...
Existing Market Definition

!   Are there current customers who would:
    "   Need the most performance possible?
!   Is ...
Existing Market


         Performance                               Our Company


                         Existing
     ...
Oops, forgot about Time


    Performance                                  Our Company

                   Existing
      ...
Existing Market Risks

!   “Better/Faster” is an engineering driven axiom
!   Incumbents defend high-end, high-margin
    ...
Resegmented Market Definition (1)
                               Low End

!   Are there customers at the low end of the ma...
Low-end Resegmentation
              “Good Enough” Performance

Performance


                Existing
                   ...
Resegmented Market Definition (2)
                                     Niche

!   Are there customers in the current marke...
Niche Resegmentation
                      “Branding” has its place


                                      Existing Custo...
Resegmented Market Risks

!   “Cheaper” is a sales-driven axiom
!   Incumbents abandon low-end, low-margin
    businesses
...
New Market Definition

!   Is there a large customer base who couldn’t do
    this before?
    "   Because of cost, availa...
New Market
              Customers That Don’t Yet Exist
                                 Existing Customers
              ...
New Market Risks

!   “New” is a marketing-driven axiom
!   New has to be unique enough that:
    "   There is a large cus...
Hybrid Markets

!   Some products fall into Hybrid Markets
!   Combine characteristics of both a new market
    and low-en...
Extra


What’s a Startup
Business Model?
Business Model

1.   A diagram that shows all the flows between your
     company and its customers




       Customer De...
Clean Tech Markets
Air, Water       Energy           Green         Renewables      Smart       Transport
 & Waste        E...
Clean Tech Markets - Risk
Air, Water       Energy           Green         Renewables      Smart       Transport
 & Waste  ...
Clean Tech Markets - Risk
               Definitions
Air, Water       Energy           Green         Renewables      Smart...
Business Plan Hypothesis


      Next…
Clean Tech Markets - Hypotheses
Size of Opportunity
Customer
Competition
Sales                    !   Your business plan i...
Clean Tech Markets -
                             Hypotheses
Size of Opportunity
Customer
                           !   S...
Your Hypothesis Go Here


    Finally…
Clean Tech Markets
                       Air, Water    Energy        Green     Renewables   Smart   Transport
           ...
Clean Tech Markets
                            Air, Water    Energy        Green     Renewables   Smart   Transport
      ...
Business Plan - Sum of Hypotheses

!   Business plan collects your hypothesis
!   Adds facts as you know them today
!   Co...
Start with the Pieces


Business Model…
Business Model

!   Goal is to get to a single diagram of your
    business
!   Start by drawing pieces of your business
 ...
Why Are You in Business?


Problem/Opportunity
Pain Points in Inter-District
 Development of Curricula
Can Save a Ton of Dollars



Recognize Your Market
        Type
Market Type?

!   Existing Market
!   Resegment a Niche
!   Resegment on Low Cost
!   New Market




       Customer Devel...
Definitions: Types of Markets
               Existing Market          Resegmented         New Market
                     ...
Type of Market Changes Everything

         Existing Market             Resegmented             New Market
               ...
So if You Succeed Do I Care?


How Big is It?
Total Available Market, Served
     Available Market, Target Market

TAM = how big is the universe        Total
          ...
sizing up the market


               $123 billion tourism
               industry inside the U.S.



               $1 bi...
OLED’s - Billion Dollar
                                 Opportunity
     -./0&1+234&5*+67'43&4)4583*+(56&'93:48          ...
Distribution Channel
How Does Your Product Get to Your Customer?
Sales Ecosystem
                   Discussion channel
                   Mandate channel
    Sale
                        ...
Distribution Channel
                                             Licensed Partners:
                                     ...
Demand Creation
How Do You Drive Demand Into Your Channel?
Demand Creation

!   State-by-state rollout: educational standards
!   Continuous iteration of feedback

       CA Pilot  ...
distribution and demand creation
   !   Unique Idea: website and iPhone app form
       symbiotic relationship

          ...
Financial Assumptions
What are the Ten Numbers that Matter?
Financial Assumptions

!   Ten Numbers that matter depends on your business
     " Average selling price

     " Life time...
Business Model
How Do The Pieces Work Together?
Bird’s Eye View of our Business
  Hardware
                    Model
   ($155)
                                          O...
BUSINESS MODEL
          iPhone Application                 Subscription Based Service


$ 2.99 (x.7)                     ...
''';!'"*0%$+%'G1)'H*(#&
       &%0?$1"12@                                         F#$3G#0&3)%-
                           ...
Customer Development Class 1 And 2 090409
Customer Development Class 1 And 2 090409
Upcoming SlideShare
Loading in...5
×

Customer Development Class 1 And 2 090409

4,896

Published on

Steve Blank's Berkeley/Columbia 2009 Customer Development Class 1 and 2

Published in: Education, Technology, Business
0 Comments
29 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
4,896
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
651
Comments
0
Likes
29
Embeds 0
No embeds

No notes for slide

Customer Development Class 1 And 2 090409

  1. 1. Advanced Entrepreneurship: Customer Development in High Tech Introduction to the Course Steve Blank sblank@kandsranch.com www.steveblank.com
  2. 2. You Are Here Plan Liquidity Company Timeline Idea 1st Round Customer Development in the High-Tech Enterprise Fall 2009
  3. 3. You Are Here Plan Liquidity Company Timeline Idea 1st Round Customer Development in the High-Tech Enterprise Fall 2009
  4. 4. How do You Get Here Plan Liquidity Company Timeline Idea 1st Round Customer Development in the High-Tech Enterprise Fall 2009
  5. 5. Entrepreneurship Logical Process Customer Development in the High-Tech Enterprise Fall 2009
  6. 6. Entrepreneurship Logical Process Intuitive Passion Customer Development in the High-Tech Enterprise Fall 2009
  7. 7. Today Part 1: Introduction to the Course Part 2: Key Concepts
  8. 8. Course Introduction ! Course Objectives ! Intro and Backgrounds ! How the Class Works ! Customer Development Customer Development in the High-Tech Enterprise Fall 2009
  9. 9. Course Objectives ! Learn how to: " Reduce product/market risk " Organize sales, marketing and business development when bringing a product to market " Understand its relationship with engineering ! Have Fun ! Learn from Each Other Customer Development in the High-Tech Enterprise Fall 2009
  10. 10. Course Prerequisites ! Officially – none ! Realistically: " Experience in bringing a new product to market " Entrepreneurship 295 or equivalent " Have written a business plan Customer Development in the High-Tech Enterprise Fall 2009
  11. 11. Introduction and Backgrounds ! Steve Blank ! Guest Speakers ! Class Customer Development in the High-Tech Enterprise Fall 2009
  12. 12. Introduction: Steve Blank 8 startups in 25 years 2 strikeouts Rocket Science, Ardent 2 walks ESL, Zilog 2 singles Convergent, MIPS 1 double SuperMac 1 home run E.piphany Non profits: Audubon, POST, Coastal Commission Blog: www.steveblank.com Twitter: sgblank Customer Development in the High-Tech Enterprise Fall 2009
  13. 13. Introduction: Class Why are you taking the class? ! How many of you have: " Been in start-ups? " Been in a startup that failed? " Raised or tried to raise money? ! How many are: " Sales, marketing or business development? " Engineers? Customer Development in the High-Tech Enterprise Fall 2009
  14. 14. How the Class Works ! Syllabus ! 3 Application Exercises " Individual projects " Max 2-pages " Use different company than the research project " Syllabus has assignment dates, due the week after " Electronic copy gets graded ! Research Project " Teams of 4 to 6 " Using customer development model analyze company success/failure, propose alternatives " Electronic copy gets graded ! Grading " Research Project (50%) " Application Exercises (25%) " Class Participation (25%) Customer Development in the High-Tech Enterprise Fall 2009
  15. 15. Class Issues ! “Tech-heavy” ! “Enterprise-heavy” ! For-profit versus non-profit ! Startups versus existing companies ! Methodology focused on product/customer risk reduction " Doesn’t work for technology risks (i.e Biotech) ! Doesn’t match your experience or opinion Customer Development in the High-Tech Enterprise Fall 2009
  16. 16. Customer Development in the High Tech Enterprise Logistics Steve Blank sblank@kandsranch.com
  17. 17. How the Class Works Part 1 Class Case Application Research Exercise Project Sept 4th Key Concepts: Mkt In & Out Class 1 & 2 Risk/Tech Risk, Vertical Mkts, Types of Startups Customer Development in the High-Tech Enterprise Fall 2009
  18. 18. How the Class Works Part 1 Class Case Application Research Exercise Project Sept 4th Key Concepts: Mkt In & Out Class 1 & 2 Risk/Tech Risk, Vertical Mkts, Types of Startups Sept 5th Customer Development IMVU Think! Class 3 & 4 & Discovery - Part 1 WebVan Customer Development in the High-Tech Enterprise Fall 2009
  19. 19. How the Class Works Part 1 Class Case Application Research Exercise Project Sept 4th Key Concepts: Mkt In & Out Class 1 & 2 Risk/Tech Risk, Vertical Mkts, Types of Startups Sept 5th Customer Development IMVU Think! Class 3 & 4 & Discovery - Part 1 WebVan Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team Class 5 & 6 Selection Draft Concept Customer Development in the High-Tech Enterprise Fall 2009
  20. 20. How the Class Works Part 1 Class Case Application Research Exercise Project Sept 4th Key Concepts: Mkt In & Out Class 1 & 2 Risk/Tech Risk, Vertical Mkts, Types of Startups Sept 5th Customer Development IMVU Think! Class 3 & 4 & Discovery - Part 1 WebVan Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team Class 5 & 6 Selection Draft Concept Sept 26th Validation– Parts 1 & 2 Wildfire Approved Class 7 & 8 Kittyhawk Concept Customer Development in the High-Tech Enterprise Fall 2009
  21. 21. How the Class Works Part 1 Class Case Application Research Exercise Project Sept 4th Key Concepts: Mkt In & Out Class 1 & 2 Risk/Tech Risk, Vertical Burger Mkts, Types of Startups Sept 5th Customer Development IMVU Think! Class 3 & 4 & Discovery - Part 1 Webvan Sept 24th Discovery - Parts 2 & 3 E-Ink Market Type Team Class 5 & 6 Selection Draft Concept Sept 26th Validation– Parts 1 & 2 Wildfire Approved Class 7 & 8 Kittyhawk Concept Oct 16th Validation– Part 3 Motive Customer Class 9 & 10 Discovery Customer Development in the High-Tech Enterprise Fall 2009
  22. 22. How the Class Works Part 2 Class Case Application Research Exercise Project Oct 17th ! Creation – Part 2 Priceline Team Meeting Class 11 & 12 ! Creation Cases Customer Development in the High-Tech Enterprise Fall 2009
  23. 23. How the Class Works Part 2 Class Case Application Research Exercise Project Oct 17th ! Creation – Part 2 Priceline Team Meeting Class 11 & 12 ! Creation Cases Nov 13th ! Company Building Peppers & Customer Team Draft Class 14 Part 1 Rogers Validation Customer Development in the High-Tech Enterprise Fall 2009
  24. 24. How the Class Works Part 2 Class Case Application Research Exercise Project Oct 17th ! Creation – Part 2 Priceline Team Meeting Class 11 & 12 ! Creation Cases Nov 13th ! Company Building Peppers & Customer Team Draft Class 14 Part 1 Rogers Validation Nov 14th ! Company Building Class 15 Part 2 Customer Development in the High-Tech Enterprise Fall 2009
  25. 25. How the Class Works Part 2 Class Case Application Research Exercise Project Oct 17th ! Creation – Part 2 Priceline Team Meeting Class 11 & 12 ! Creation Cases Nov 13th ! Company Building Peppers & Customer Team Draft Class 14 Part 1 Rogers Validation Nov 14th ! Company Building Class 15 Part 2 Dec 3rd Summary Customer Creation Customer Development in the High-Tech Enterprise Fall 2009
  26. 26. How the Class Works Part 2 Class Case Application Research Exercise Project Oct 17th ! Creation – Part 2 Priceline Team Meeting Class 11 & 12 ! Creation Cases Nov 13th ! Company Building Peppers & Customer Team Draft Class 14 Part 1 Rogers Validation Nov 14th ! Company Building Class 15 Part 2 Dec 3rd Summary Customer Creation Dec 6th Research Pescadero Research Conference Paper Due Customer Development in the High-Tech Enterprise Fall 2009
  27. 27. Reading Class Text: Four Steps to the Epiphany Assigned Reading: In Reader Blogs: www.steveblank.com http://startuplessonslearned.blogspot.com/ Presentations: www.slideshare.net/ Google Group: http://groups.google.com/group/lean-startup-circle Twitter: sgblank ericries watch http://www.youtube.com/watch?v=R2lE3fgj7QA for what you could be in store for Customer Development in the High-Tech Enterprise Fall 2009
  28. 28. Angel/Study.net http://bcangel.gsb.columbia.edu ! All materials are on Angel/Study.net " Syllabus " Reading " Assignments " Presentations (after each class) Customer Development in the High-Tech Enterprise Fall 2009
  29. 29. Customer Development in the High Tech Enterprise The Course Steve Blank sblank@kandsranch.com
  30. 30. Customer Development ! Business Plans ! The Value of “Models” for an Entrepreneur ! Key Concepts " Market versus Technology Risks " Vertical Markets " Three Types of Startups Customer Development in the High-Tech Enterprise Fall 2009
  31. 31. The Top Lies of Venture Capitalists 1. “I liked your company, but my partners didn't.” 2. “If you get a lead, we will follow.” 3. “Show us some traction, and we'll invest.” 4. “We love to co-invest with other venture capitalists.” 5. “We're investing in your team.” 6. “I have lots of bandwidth to dedicate to your company.” 7. “This is a vanilla term sheet.” 8. “We can open up doors for you at our client companies.” 9. “We like early-stage investing.” Source: Guy Kawasaki Customer Development in the High-Tech Enterprise Fall 2009
  32. 32. The Top Lies of Entrepreneurs 1. “Our projections are conservative.” 2. “(Big name research firm) says our market will be $50 billion in 2010.” 3. “(Big name company) is going to sign our purchase order next week.” 4. “Key employees are set to join us as soon as we get funded.” 5. “No one is doing what we're doing.”. 6. “No one can do what we're doing.” 7. “Hurry because several other venture capital firms are interested.” 8. “Oracle is too big/dumb/slow to be a threat.” 9. “We have a proven management team.” 10. “Patents make our product defensible.” 11. “All we have to do is get 1% of the market.” Customer Development in the High-Tech Enterprise Fall 2009 Source: Guy Kawasaki
  33. 33. One Way to Plan a Startup Customer Development in the High-Tech Enterprise Fall 2009
  34. 34. Business Plans – Why? ! Why write a plan? " VC’s require it " Planning (Strategic/Financial/Ops) " Articulate Bus Model/Assumptions ! What’s wrong with a plan? " Static " Execution Oriented Customer Development in the High-Tech Enterprise Fall 2009
  35. 35. The Value of “Models” ! Model = shorthand for complicated idea " Check to see if the results are static or dynamic ! For example, … Customer Development in the High-Tech Enterprise Fall 2009
  36. 36. Timmons Model of Entrepreneurship (The Business Plan) Communication Resources Opportunity Business Plan Creativity Leadership Team Customer Development in the High-Tech Enterprise Fall 2009
  37. 37. Moore Model of Entrepreneurship (Chasm + Life Cycle) Customer Development in the High-Tech Enterprise Fall 2009
  38. 38. New Product Introductions What’s the Model? ! New Product introduction models " Checklist of what to and when to do it " Market size and business case " Models try to ensure that product matches market " Technology and development “gates” Customer Development in the High-Tech Enterprise Fall 2009
  39. 39. StageGate™ Model (New Product Introduction) Customer Development in the High-Tech Enterprise Fall 2009
  40. 40. Customer Development in the High-Tech Enterprise Fall 2009
  41. 41. Steve Blank Model of Entrepreneurship) Customer Development in the High-Tech Enterprise Fall 2009
  42. 42. Venture Capital Model of a Startup (Execution) Concept/ Product Alpha Test/ Launch/ Bus. Plan Development Beta Test 1st Ship Customer Development in the High-Tech Enterprise Fall 2009
  43. 43. New Product Introduction It Doesn’t Always Work ! New Product Development Process " Works great for some new products, fails miserably for others " Products usually are late, over cost " Typically fails to understand and satisfy customer needs ! Why? Customer Development in the High-Tech Enterprise Fall 2009
  44. 44. Issues in New Product Intros ! Current models: " Confuse product development process with customer needs " Treat all startups as the same ! We need a New Product Intro Process " Reduces Market RiskSimple, understood by all " Founders commitment " Cross function organization " Solid homework Customer Development in the High-Tech Enterprise Fall 2009
  45. 45. Product Development - Microsoft Unit of progress: Advance to Next Stage Waterfall Problem: known Solution: known Customer Development in the High-Tech Enterprise Fall 2009
  46. 46. Product Development - Startup Assumes Customers and Markets are Understood Agile (XP)! “Product Owner” or in-house customer Problem: known Solution: unknown Customer Development in the High-Tech Enterprise Fall 2009
  47. 47. Product Development - Lean Startup Assumes Customers and Markets are Unknown Customer Development Engineering Customer Customer Customer Scale Discovery Validation Creation Company Data, feedback, insights Problem: unknown Solution: unknown Hypotheses, experiments, insights Customer Development in the High-Tech Enterprise Fall 2009
  48. 48. The Lean Startup Model Agile Product Development ! Continuous cycle of Product Development " Product release cycle in hours not years " Tightly coupled with customer development " Minimum feature sets, Agile maximum customer Product Development coverage Customer Development in the High-Tech Enterprise Fall 2009
  49. 49. The Lean Startup Model Customer Development ! Continuous cycle of Customer customer interaction Development " Rapid hypothesis testing about market, pricing, customers, … " Extreme low cost, low burn, tight focus " Measurable gates for investors Customer Development in the High-Tech Enterprise Fall 2009
  50. 50. Lean Startup Principles Extraordinary Value at Low cost in Little Time ! Leverages: Customer Development " Commodity Technology " Agile management " Customer Development ! Designed to test hypothesis and answer the unknowns Agile Product Development Customer Development in the High-Tech Enterprise Fall 2009
  51. 51. The Lean Startup Model Customer Development Parallels Agile Development Agile Development Concept / Agile Continuous Continuous Business Plan Development Test Ship Customer Development Customer Customer Customer Company Discovery Validation Creation Building Customer Development in the High-Tech Enterprise Fall 2009
  52. 52. Customer Development Turns Market Risk/Product Fit Hypothesis into Facts Customer Customer Customer Company Discovery Validation Creation Building ! Discovery: Test hypotheses i.e. problem and product ! Validation: Build a repeatable and scalable sales process ! Creation: Create end-user demand and fill the sales pipeline ! Building: Scale via relentless execution Customer Development in the High-Tech Enterprise Fall 2009
  53. 53. Lean Startup Advantages Customer Development ! Builds low-burn companies by design " Low cost market risk testing Agile ! Organized around learning and Product Development discovery ! Right model for current conditions The next wave of capital efficient startups Customer Development in the High-Tech Enterprise Fall 2009
  54. 54. The Value of “Models” ! Model = shorthand for complicated idea ! This class teaches a “model” for product introduction ! How to reduce risk for customer/market fit ! Side effect is rethinking timing in Sales, Marketing & Business Development Customer Development in the High-Tech Enterprise Fall 2009
  55. 55. Customer Development Product Development Concept/ Product Alpha/Beta Launch/ Bus. Plan Dev. Test 1st Ship Customer Development Customer Customer Customer Scale Discovery Validation Creation Company Customer Development in the High-Tech Enterprise Fall 2009
  56. 56. Customer Development This is what our class is about Customer Customer Customer Scale Discovery Validation Creation Company Customer Development in the High-Tech Enterprise Fall 2009
  57. 57. Customer Development in the High Tech Enterprise Key Concepts Steve Blank sblank@kandsranch.com www.steveblank.com
  58. 58. Class 2: Agenda ! Vertical Markets ! Market Risk vs. Invention Risk ! Case: In N Out ! Three Types of Startups ! Customer Development " Definitions " Market Type effects Customer Development in the High-Tech Enterprise Fall 2009
  59. 59. New Product Conundrum ! New Product Introduction methodologies sometimes work, yet sometimes fail " Why? " Is it the people that are different? " Is it the product that are different? ! Perhaps there are different “types” of startups? Customer Development in the High-Tech Enterprise Fall 2009
  60. 60. Startup Checklist – 1 What Vertical Market am I In? ! Web 2.0 ! Semiconductors ! Enterprise Software ! Electronic Design ! Enterprise Hardware Automation ! Communication Hdw ! Cleantech ! Communication Sftw ! Med Dev / Health Care ! Consumer Electronics ! Life Science / Biotech ! Game Software ! Personalized Medicine Customer Development in the High-Tech Enterprise Fall 2009
  61. 61. A Plethora of Opportunities Customer Development in the High-Tech Enterprise Fall 2009
  62. 62. Market Risk vs. Invention Risk Customer Development in the High-Tech Enterprise Fall 2009
  63. 63. Startup Checklist - 2 ! Market Risk? ! Technical Risk? ! Both? Customer Development in the High-Tech Enterprise Fall 2009
  64. 64. Startup Checklist - 3 ! Opportunity Where does the idea come from? ! Innovation Where is the innovation? ! Customer Who is the User/Payer? ! Competition Who is the competitor/complementor? ! Sales What is the Channel to reach the customer? ! Marketing: How do you create end user demand? ! What does Biz Dev do? Deals? Partnerships? Sales? ! Business/Revenue Model(s) How do we organize to make money? ! IP/PatentsRegulatory Issues? How and how long? ! Time to Market How long does it take to get to market? ! Product Development Model How to you engineer it? ! Manufacturing What does it take to build it? ! Seed Financing How much? When? ! Follow-on Financing How much? When? ! Liquidity How much? When? Customer Development in the High-Tech Enterprise Fall 2009
  65. 65. Execution: Lots to Worry About Customer Development in the High-Tech Enterprise Fall 2009
  66. 66. Execution: Very Different by Vertical Customer Development in the High-Tech Enterprise Fall 2009
  67. 67. Market Risk Reduction Strategy Customer Development in the High-Tech Enterprise Fall 2009
  68. 68. In-N-Out Case
  69. 69. In-N-Out Secret Menu ! X by Y ! Grilled Cheese " X meat patties and Y slices of cheese " Two slices of melted cheese, tomato, (for example, a 3 by 3 or a 2 by 4) lettuce and spread on a bun, with no meat. ! Double Meat ! Extra Everything " Two meat patties without cheese. " Adds extra spread, tomato, lettuce, and ! Triple Meat onions (regular or grilled). " Three meat patties without cheese. ! Fries "Light" ! Animal Style " Almost raw fries that are cooked for less time. " A mustard cooked beef patty served on a bun with pickles, lettuce, tomatoes, extra ! Fries "Well" (aka "Wellies") spread and grilled onions. Any burger " Fries that are cooked longer to be extra (including veggie and grilled cheeses) may crisp. be made this way. ! Cheese Fries ! Flying Dutchman " Fries with two slices of melted cheese " Two meat patties, two slices of melted placed on top. cheese and nothing else. ! Animal Style Fries ! Protein Style " Fries with cheese, spread, and grilled " Instead of a bun, the burger is wrapped in onions. lettuce. Any burger (including veggie and ! Neapolitan Shake grilled cheeses) may be made this way. " All three shake flavors (strawberry, vanilla ! Veggie Burger (Wish Burger) and chocolate) combined in one shake. " A burger without the meat and cheese. Customer Development in the High-Tech Enterprise Fall 2009
  70. 70. In-N-Out Meat Factory Customer Development in the High-Tech Enterprise Fall 2009
  71. 71. So Why Are We Talking About This? Existing Market Resegmented New Market Market Customer Development in the High-Tech Enterprise Fall 2009
  72. 72. Three Types of Markets Existing Market Resegmented New Market Market Customer Development in the High-Tech Enterprise Fall 2009
  73. 73. Three Types of Markets Existing Market Resegmented New Market Market ! Who Cares? ! Type of Market changes EVERYTHING ! Sales, marketing and business development differ radically by market type Customer Development in the High-Tech Enterprise Fall 2009
  74. 74. Definitions: Three Types of Markets Existing Market Resegmented New Market Market ! Existing Market " Faster/Better = High end ! Resegmented Market " Niche = marketing/branding driven " Cheaper = low end ! New Market " Cheaper/good enough can create a new class of product/customer " Innovative/never existed before Customer Development in the High-Tech Enterprise Fall 2009
  75. 75. Existing Market Definition ! Are there current customers who would: " Need the most performance possible? ! Is there a scalable business model at this point? ! Is there a defensible business model " Are there sufficient barriers to competition from incumbents? Customer Development in the High-Tech Enterprise Fall 2009
  76. 76. Existing Market Performance Our Company Existing Companies Customer Development in the High-Tech Enterprise Fall 2009
  77. 77. Oops, forgot about Time Performance Our Company Existing wt h c e G ro Companies Today rfo rm an Co mp any Pe g E x is t in Time Customer Development in the High-Tech Enterprise Fall 2009
  78. 78. Existing Market Risks ! “Better/Faster” is an engineering driven axiom ! Incumbents defend high-end, high-margin businesses ! Factor in: " Network effect of incumbent " Sustaining innovation of incumbent " Industry (or you own) “standards” ! “They’ll never catch up” is not a business strategy ! Established companies almost always win Customer Development in the High-Tech Enterprise Fall 2009
  79. 79. Resegmented Market Definition (1) Low End ! Are there customers at the low end of the market who would: " buy less (but good enough) performance " if they could get it at a lower price? ! Is there a business profitable at this low-end? ! Are there sufficient barriers to competition from incumbents? Customer Development in the High-Tech Enterprise Fall 2009
  80. 80. Low-end Resegmentation “Good Enough” Performance Performance Existing wt h Companies rm an c e G ro rfo any Pe Today g Co mp E x is t in Our Company At the Low-end Time Customer Development in the High-Tech Enterprise Fall 2009
  81. 81. Resegmented Market Definition (2) Niche ! Are there customers in the current market who would: " buy if it addressed their specific needs " if it was the same price? " If it cost more? ! Is there a defensible business model at this point? ! Are there barriers to competition from incumbents? Customer Development in the High-Tech Enterprise Fall 2009
  82. 82. Niche Resegmentation “Branding” has its place Existing Customers Performance New Niches a ny N ew C om p a N ic h e fo r a ny N ew C om p a N ic h e fo r n y n gC om pa E x is t i Time Customer Development in the High-Tech Enterprise Fall 2009
  83. 83. Resegmented Market Risks ! “Cheaper” is a sales-driven axiom ! Incumbents abandon low-end, low-margin businesses " For sometimes the right reasons ! Low-end must be coupled with a profitable business model " Up migration Customer Development in the High-Tech Enterprise Fall 2009
  84. 84. New Market Definition ! Is there a large customer base who couldn’t do this before? " Because of cost, availability, skill…? ! Did they have to go to an inconvenient, centralized location? ! Are there barriers to competition from incumbents? Customer Development in the High-Tech Enterprise Fall 2009
  85. 85. New Market Customers That Don’t Yet Exist Existing Customers New Niches Performance New Customers New Markets a ny ng Com p E x is t i t M arke N ew Time Customer Development in the High-Tech Enterprise Fall 2009
  86. 86. New Market Risks ! “New” is a marketing-driven axiom ! New has to be unique enough that: " There is a large customer base who couldn’t do this before " They want/need/can be convinced " Adoption occurs in your lifetime ! Company manages adoption burn rate " Investors are patient and have deep pockets Customer Development in the High-Tech Enterprise Fall 2009
  87. 87. Hybrid Markets ! Some products fall into Hybrid Markets ! Combine characteristics of both a new market and low-end resegmentation " SouthWest Airlines " Dell Computers " Cell Phones " Apple iPhone? Customer Development in the High-Tech Enterprise Fall 2009
  88. 88. Extra What’s a Startup Business Model?
  89. 89. Business Model 1. A diagram that shows all the flows between your company and its customers Customer Development in the High-Tech Enterprise Fall 2009
  90. 90. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power Customer Development in the High-Tech Enterprise Fall 2009
  91. 91. Clean Tech Markets - Risk Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power ! Which markets have technology risk? ! Which markets have customer risk? ! Which have both? Customer Development in the High-Tech Enterprise Fall 2009
  92. 92. Clean Tech Markets - Risk Definitions Air, Water Energy Green Renewables Smart Transport & Waste Efficiency Building Power ! Technology Risk " risk is in development of the product (i.e. fuel cells, thin-film arrays, etc.) then customers automatically adopt ! Customer risk " risk is in customer and market adoption ! Which have both? ! You spend your time differently depending on risk Customer Development in the High-Tech Enterprise Fall 2009
  93. 93. Business Plan Hypothesis Next…
  94. 94. Clean Tech Markets - Hypotheses Size of Opportunity Customer Competition Sales ! Your business plan is a set of untested Marketing hypothesis Biz Dev Customer Dev ! What are they? Bus/Rev Model ! How do you test them? IP/Patents Regulatory ! How do you execute them? Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity Customer Development in the High-Tech Enterprise Fall 2009
  95. 95. Clean Tech Markets - Hypotheses Size of Opportunity Customer ! Size of Opportunity Competition " TAM, SAM Sales ! Customer Marketing " Who’s the end user? Economic buyer? Biz Dev Reimburser? Customer Dev ! Sales Bus/Rev Model " What’s the distribution channel? IP/Patents ! Marketing " How do you create end-user demand Regulatory Time to Market ! Customer Development " How do you test your hypothesis Prod Dev Model ! Business Model Manufacturing " How do all the parts work to create profits? Team ! Financing Seed Financing " What is the path to cash flow positive Follow-on Liquidity Customer Development in the High-Tech Enterprise Fall 2009
  96. 96. Your Hypothesis Go Here Finally…
  97. 97. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport Waste Efficiency Building Power Size of Opportunity Customer Competition Sales Marketing Biz Dev Customer Dev Bus/Rev Model IP/Patents Regulatory Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity Customer Development in the High-Tech Enterprise Fall 2009
  98. 98. Clean Tech Markets Air, Water Energy Green Renewables Smart Transport Waste Efficiency Building Power Size of Opportunity Customer Competition Sales Marketing Biz Dev Customer This Is Important Development Bus/Rev Model IP/Patents Regulatory Time to Market Prod Dev Model Manufacturing Team Seed Financing Follow-on Liquidity Customer Development in the High-Tech Enterprise Fall 2009
  99. 99. Business Plan - Sum of Hypotheses ! Business plan collects your hypothesis ! Adds facts as you know them today ! Contains a plan of how to turn hypothesis into facts ! Extrapolates results if hypothesis turn into facts ! Has a business model which is clearly articulated Customer Development in the High-Tech Enterprise Fall 2009
  100. 100. Start with the Pieces Business Model…
  101. 101. Business Model ! Goal is to get to a single diagram of your business ! Start by drawing pieces of your business " Problem/Opportunity " Market Size " Distribution Channel " Demand Creation " Financial assumptions ! Then put it all together Customer Development in the High-Tech Enterprise Fall 2009
  102. 102. Why Are You in Business? Problem/Opportunity
  103. 103. Pain Points in Inter-District Development of Curricula
  104. 104. Can Save a Ton of Dollars Recognize Your Market Type
  105. 105. Market Type? ! Existing Market ! Resegment a Niche ! Resegment on Low Cost ! New Market Customer Development in the High-Tech Enterprise Fall 2009
  106. 106. Definitions: Types of Markets Existing Market Resegmented New Market Market ! Existing Market " Faster/Better = High end ! Resegmented Market " Niche = marketing/branding driven " Cheaper = low end ! New Market " Cheaper/good enough can create a new class of product/customer " Innovative/never existed before Customer Development in the High-Tech Enterprise Fall 2009
  107. 107. Type of Market Changes Everything Existing Market Resegmented New Market Market ! Market " Market Size ! Sales • Customers " Cost of Entry " Sales Model - Needs " Launch Type " Margins - Adoption " Competitive " Sales Cycle Barriers " Chasm Width " Positioning • Finance - Ongoing Capital - Time to Profitability Customer Development in the High-Tech Enterprise Fall 2009
  108. 108. So if You Succeed Do I Care? How Big is It?
  109. 109. Total Available Market, Served Available Market, Target Market TAM = how big is the universe Total Available Market Served Available Market Target SAM = how many can I reach Market with my sales channel Target Market (for a startup) = who will be the most likely buyers Customer Development in the High-Tech Enterprise Fall 2009 10 9
  110. 110. sizing up the market $123 billion tourism industry inside the U.S. $1 billion English travel guides sold annually $210 million 20-35 year old travelers SF (Initial test market)
  111. 111. OLED’s - Billion Dollar Opportunity -./0&1+234&5*+67'43&4)4583*+(56&'93:48 Our target market is the Flat !"#$%&'())(*+, ;./0&;(<4&*=&->&'93:48 Panel display market. !"A%%&'())(*+B, Target products: Camcorders, DVD -93?48&/:80&"@AA players and recorder, digital cameras, '())(*+B computer monitors, LCD and Plasma TV Apex: ! 3.5M OLED TV market will grow to $15.29 billion by 2015 YEAR 1 PROJECTIONS Units sold : 1,000,000 Price per unit : $700 - $1,000 Revenue from Royalties (assuming .5-1.0% of shelf price): Worst case = $3,500,000 Best Case = $10,000,000 Customer Development in the High-Tech Enterprise Fall 2009
  112. 112. Distribution Channel How Does Your Product Get to Your Customer?
  113. 113. Sales Ecosystem Discussion channel Mandate channel Sale Superintendant Another District district IT Director Engagement (Early Stages) School Dept. Head Another school in the district Teacher Teacher
  114. 114. Distribution Channel Licensed Partners: • Sony Consumer electronics • Samsung • Flat Screen TVs through (Other possibilities - LG, Toshiba, Panasonic, DuPont) Fry’s, Best Buy, Magnolia, etc IP . C Patents !"#$%"&'$()#* +),'()-$./# 01'")2 1 D 2 patents owned by Apex! Partners’ distribution channels • Technology patent - SOLED • Sony • Long-Brite and inkjet printing process • Samsung (Other possibilities - LG, Toshiba, Panasonic, DuPont) Dollar flows: Wages: founders & Consultants IP Costs: Lawyer . C License fees C.E-F1E; & Patent costs. 1 Royalties Premises: Dev’t labs. D
  115. 115. Demand Creation How Do You Drive Demand Into Your Channel?
  116. 116. Demand Creation ! State-by-state rollout: educational standards ! Continuous iteration of feedback CA Pilot Broad Grow Adoption Adoption ! Hypotheses: Will ! Hypotheses: Will ! Hypothesis: How they adopt, use, they buy hands- well does it sell and pay? off? Can it scale? itself? ! 10 schools f2f: ! CA telemarket ! All telemarket ! Sales: $1,066 ! F2f elsewhere ! $533/dist ! Travel: $1,000
  117. 117. distribution and demand creation ! Unique Idea: website and iPhone app form symbiotic relationship Travel AdWords App traffic Listing TravelSpy.com iPhone App traffic Blogs (ex. Magazines Travelblog.org)
  118. 118. Financial Assumptions What are the Ten Numbers that Matter?
  119. 119. Financial Assumptions ! Ten Numbers that matter depends on your business " Average selling price " Life time value " Material cost " Distribution channel cost " Customer Acquisition cost " Time to market " Time to cash flow positive " Etc. ! Do this before 45 pages of financials Customer Development in the High-Tech Enterprise Fall 2009
  120. 120. Business Model How Do The Pieces Work Together?
  121. 121. Bird’s Eye View of our Business Hardware Model ($155) Online Distribution • Own website ($208+.3x) Customer • Amazon.com ($40+32x) • eBay ($300+25x) Acquisition Target Market Cost: ($41) Demand Creation Viral MyNote • SEO/SEM ($156.00) Marketing • Blogs • Forums • Bookstore promotion • Sales force • Viral marketing Offline Distribution • Website $399.99 • College bookstores ($0.02) Software (in-house) ($1.00)
  122. 122. BUSINESS MODEL iPhone Application Subscription Based Service $ 2.99 (x.7) $ 5/month Year 1: $ 40K END-USERS END-USERS Year 1: $ 50K Year 2: $1M Year 2: $1.2 M E IC SE E RV NU RV RE SE VE IC VE E RE Third NU Nightlife E party venues affiliates CITYBEATS.COM Two Revenue Streams March | 2011 Total Revenue (year 1) = $ 90 K Critical Mass: 500,000 users Total Revenue (year 2) = $ 2.2 M
  123. 123. ''';!'"*0%$+%'G1)'H*(#& &%0?$1"12@ F#$3G#0&3)%- 4=#""%)'C13&%) !)1-30& 5I/J6 01=:#$*%+ M*+&)*N3&1)+ *%'D%&2%#)E 5OJ/6P *%'H*$-+1) F%)3 !)1-30& M%"*<%)@ !"#$%&'(#&&%)*%+ 5PI/S8 C%&#*"'4&1)%+ */%/'(%+&'(3@E'Q)@R+ ,$- .+%) 5678 4#"% 91):1)#&%';$<%+&1)+ •!#)&$%)')13&%)'01=:#$*%+ •;$&%"'>&?%@'#)%'*$&%)%+&%-'*$ ,$-'.+%)+ A*)%"%++'&%0?$1"12@B */%/'01""%2%'+&3-%$&+ >4%%'#::%$-*K','G1)'L23)%+B
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×