Customer Development Class 3 And 4 090509

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Steve Blank's Berkeley/Columbia Customer Development Class 3 and 4

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Customer Development Class 3 And 4 090509

  1. Customer Development in the High Tech Enterprise Customer Development Steve Blank sblank@kandsranch.com
  2. Agenda ! Logistics/Questions ! Market vs. Technology Risk ! Boyd & the OODA Loop ! Customer Development ! CASE: IMVU ! CASE: WebVan Customer Development in the High-Tech Enterprise Fall 2009
  3. Market Versus Technology Risk
  4. Startup Checklist – 1 What Vertical Market am I In? ! Web 2.0 ! Semicondutors ! Enterprise Software ! Electronic Design ! Enterprise Hardware Automation ! Communciaton 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
  5. A Plethora of Opportunities Customer Development in the High-Tech Enterprise Fall 2009
  6. Startup Checklist - 2 ! Market Risk? ! Technical Risk? ! Both? Customer Development in the High-Tech Enterprise Fall 2009
  7. Market Risk vs. Invention Risk Customer Development in the High-Tech Enterprise Fall 2009
  8. 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
  9. Execution: Lots to Worry About Customer Development in the High-Tech Enterprise Fall 2009
  10. Execution: Very Different by Vertical Customer Development in the High-Tech Enterprise Fall 2009
  11. Market Risk Reduction Strategy Customer Development in the High-Tech Enterprise Fall 2009
  12. John Boyd & the OODA Loop
  13. Customer Development in the High-Tech Enterprise Fall 2009
  14. Boyd’s OODA “Loop” Observe Orient Decide Act Implicit Implicit Unfolding Guidance Cultural Guidance Circumstances & Control Traditions & Control Genetic Analyses & Feed Observations Forward Heritage Synthesis Feed Decision Feed Action Forward Forward (Hypothesis) (Test) New Information Previous Experience Outside Unfolding Information Interaction With Unfolding Environment Interaction Feedback With Environment Feedback Orientation shapes observation, shapes decision, shapes action, and in turn is shaped by the feedback and other phenomena coming into our observing window. Competitive advantage comes from quickness over the entire “loop,” not just from the O-to-O-to-D-to-A sequence. Customer Development in the High-Tech Enterprise Fall 2009
  15. Customer Development
  16. If Startups Fail from a Lack of customers not Product Development Failure Then Why Do we have: ! process to manage product development ! no process to manage customer development Customer Development in the High-Tech Enterprise Fall 2009
  17. Product Development Model Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship Customer Development in the High-Tech Enterprise Fall 2009
  18. What’s Wrong With This? Product Development Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” Customer Development in the High-Tech Enterprise Fall 2009
  19. What’s Wrong With This? Product Development Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Sales • Hire 1st Sales Staff Organization Customer Development in the High-Tech Enterprise Fall 2009
  20. What’s Wrong With This? Product Development Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Sales • Hire 1st Sales Staff Organization Business • Hire First • Do deals for FCS Development Bus Dev Customer Development in the High-Tech Enterprise Fall 2009
  21. Chasing The FCS Date ! Sales & Marketing costs are front loaded " focused on execution vs. learning & discovery ! First Customer Ship becomes the goal ! Execution & hiring predicated on business plan hypothesis ! Heavy spending hit if product launch is wrong ! Financial projections, assumes all startups are the same = You don’t know if you’re wrong until you’re out of business/money Customer Development in the High-Tech Enterprise Fall 2009
  22. An Inexpensive Fix Focus on Customers and Markets from Day One How? Customer Development in the High-Tech Enterprise Fall 2009
  23. Build a Customer Development Process Product Development Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship Customer Development ? ? ? ? Customer Development in the High-Tech Enterprise Fall 2009
  24. Customer Development is as important as Product Development Product Development Concept/ Product Alpha/Beta Launch/ Bus. Plan Dev. Test 1st Ship Customer Development Customer Customer Customer Company Discovery Validation Creation Building Customer Development in the High-Tech Enterprise Fall 2009
  25. Customer Development is as important as Product Development Product Development Concept/ Product Alpha/Beta Launch/ Bus. Plan Dev. Test 1st Ship Customer Development Customer Customer Customer Company Discovery Validation Creation Building Customer Development in the High-Tech Enterprise Fall 2009
  26. Customer & Product Development Synchronization 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
  27. Customer Development Heuristics ! There are no facts inside your building, so get outside ! Develop for the Few, not the Many ! Earlyvangelists make your company " And are smarter than you ! Focus Groups are for big companies, not startups ! The goal for release 1 is the minimum feature set for earlyvangelists Customer Development in the High-Tech Enterprise Fall 2009
  28. Customer Development Big Ideas ! Parallel process to Product Development ! Measurable Checkpoints for the CEO ! Not tied to FCS, but to customer milestones ! Iterative to represent reality ! Executed by a small team including CEO Customer Development in the High-Tech Enterprise Fall 2009
  29. Customer Development is about Action ! Never, ever confuse it with a “planning process” ! Never, ever confuse it with “focus groups” Customer Development is about putting the Founders in Continuous Contact and Engagement with the customer Customer Development in the High-Tech Enterprise Fall 2009
  30. Customer Development in the High Tech Enterprise Customer Discovery: Part 1 Steve Blank sblank@kandsranch.com
  31. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building Existing Market: 1 Month – 1 Year Resegmenting a Market: 6 Months – 3 Years New Market: 1 Year – 3 Years Customer Development in the High-Tech Enterprise Fall 2009
  32. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building Existing : 1-6 Months Resegmenting: 3-12 Months New: 1-2 Years Customer Development in the High-Tech Enterprise Fall 2009
  33. Methodology ! Customer Development can take months or years ! Each Step has a set of phases ! Plan what you need to learn in writing so everyone knows: " what they should be doing " when they should do it " If they succeeded " If they need to do more ! These are checklists, not the inviolable commandments Customer Development in the High-Tech Enterprise Fall 2009
  34. Before You Start ! Board and Management Buy-In " Learning and discovery not execution ! Customer Development Team " Not traditional hires ! Sufficient funding for 2-3 passes Customer Development in the High-Tech Enterprise Fall 2009
  35. Modify the Process for Your Company ! Text Example = Enterprise Software Co. ! You need to develop your own " Specifically for your company/market ! Don’t quibble about details but understand there is a process Customer Development in the High-Tech Enterprise Fall 2009
  36. Discovery = Hypothesis Testing ! What are Hypothesis? ! Where do Hypothesis come from? ! Why Test them? ! How do you test them? Customer Development in the High-Tech Enterprise Fall 2009
  37. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building ! Stop selling, start listening ! Test your hypotheses " Two are fundamental: problem and product concept Customer Development in the High-Tech Enterprise Fall 2009
  38. Customer Discovery Customer Phase 3 Phase 4 Discovery Test Verify, Iterate & Product Expand Hypothesis To Validation Phase 1 Phase 2 Author Test Hypothesis Problem Hypothesis Customer Development in the High-Tech Enterprise Fall 2009
  39. Customer Discovery Hypotheses Product Customer Distribution Demand Market Type Competitive Hypothesis & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Test “Problem” Hypothesis Friendly “Problem” Customer Market First Contacts Presentation Understanding Knowledge Test “Product” Hypothesis First Reality “Product” Yet More Second Check Presentation Customer Reality Check Visits Verify Verify the Verify the Verify the Iterate or Product Problem Business Exit Customer Development in the High-Tech Enterprise Model Fall 2009
  40. Customer Discovery Hypotheses Product Hypothesis Inside the Building Customer & Problem Hypothesis Distribution & Pricing Hypothesis Demand Creation Hypothesis Market Type Hypothesis Competitive Hypothesis Test “Problem” Friendly First Contacts Hypothesis “Problem” Presentation Customer Understanding Market Knowledge Outside the Building Test “Product” Hypothesis First Reality “Product” Yet More Second Check Presentation Customer Reality Check Verify Visits Verify the Verify the Verify the Iterate or Product Problem Business Exit Customer Development in the High-Tech Enterprise Model Fall 2009
  41. Phase 1: Author Hypothesis Phase 3 Product Phase 4 Iterate & ! One-time writing exercise Concept Expand Testing ! All other time spent in front of customers Phase 1 ! Assumes you’re smart but Phase 2 Test Author guessing Problem Hypothesis Hypothesis Customer Development in the High-Tech Enterprise Fall 2009
  42. Hypothesis ! Product ! Customer/Problem ! Distribution/Pricing ! Demand Creation ! Market Type ! Competition Product Customer Distribution Demand Market Type Competitive Hypothesis & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Customer Development in the High-Tech Enterprise Fall 2009
  43. Product Hypotheses ! Features ! Benefits ! Product Delivery Schedule ! Intellectual Property ! Total Cost of Ownership ! Dependency Analysis Customer Development in the High-Tech Enterprise Fall 2009
  44. Customer/Problem Hypotheses ! Types of Customers ! Magnitude of the problem ! Visionaries ! A Day in the Life of a customer ! Organizational impact ! ROI Justification ! Problem Recognition ! Minimum Feature Set Customer Development in the High-Tech Enterprise Fall 2009
  45. Distribution/ Pricing Hypotheses ! Distribution Model ! Distribution Diagram ! Sales Cycle/Ramp ! Channel strategy ! Pricing (ASP, LTV) ! Customer Organization Map ! Demand Creation Customer Development in the High-Tech Enterprise Fall 2009
  46. Demand Creation Hypotheses ! How do competitors create demand? ! How will you? " Viral " Advertising " PR " Trade shows ! Who are influencers/recommendors? ! Key trade shows? ! Key trends? ! Start assembling advisory board Customer Development in the High-Tech Enterprise Fall 2009
  47. Type of Market Hypotheses ! Positioning and Differentiation " Existing Market # The product is the basis of competition " New Market # Creating the market is the basis of competition " Redefine Existing Market # Resegment the existing market is the basis of competition Customer Development in the High-Tech Enterprise Fall 2009
  48. Competition Hypotheses ! Who is out there? ! Why are they important? ! How do customers use them today? ! What don’t customers like about them? Customer Development in the High-Tech Enterprise Fall 2009
  49. IMVU Case
  50. Intermission The Customer Development Team
  51. Traditional organizations and titles Fail Typical Startup CEO VP Engineering VP Marketing VP Sales VP Business Dev ! People equate their titles with their functions " But standard titles describe execution functions " We need new titles = learning & discovery functions Customer Development in the High-Tech Enterprise Fall 2009
  52. Customer Development Team Tasks Not Titles Customer Development Driven Startup CEO VP Product Dev Technical Visionary Business Visionary Business Execution In Front of Customers Customer Development in the High-Tech Enterprise Fall 2009
  53. Webvan Case

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