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Bus model and cust dev jan 2013

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  • 1. Business Models &Customer Development Teaching Points www.steveblank.com @sgblank
  • 2. Business Model Canvas Why? How?
  • 3. TEACHING POINT Why? This Class
  • 4. The Search for a Path 1602 - 1908
  • 5. © 2012 Steve Blank
  • 6. The MBAthe Path to Business Execution
  • 7. © 2012 Steve Blank
  • 8. TEACHING POINT Business Schools
  • 9. Business Schools• Made the American Century• Embraced entrepreneurship – Myles Mace HBS 1947, Stanford 1953 – But as an activity you execute• Now embracing search TEACHING POINT
  • 10. What We Used to Believe
  • 11. Startups are a Smaller Version of a Large Company
  • 12. What We Now Know
  • 13. Startups SearchCompanies Execute
  • 14. TEACHING POINT Why? Startups are Not Smaller Versions of a Large Company Search versus Execution
  • 15. Startups versus existing companies• That startups begin with a series of unknowns (mostly) – They Search• That existing companies deal with execution of knowns (mostly) – They Execute• The insight is that management tools built to execute do not work in search• Early stage ventures need their own tools TEACHING POINT
  • 16. What’s a Startup?
  • 17. © 2012 Steve Blank
  • 18. TEACHING POINT Why? Why a definition of a startup?
  • 19. What’s A Startup A temporary organization designed to search for a repeatable and scalable business model• This is what the class is about• It’s a definition filled with action• Each word has meaning – Temporary – Search – Repeatable – Scalable – Business Model TEACHING POINT
  • 20. What We Used to Believe Strategy
  • 21. Start With an Operating Plan and Financial Model
  • 22. What We Now Know Strategy
  • 23. Planning comes before the plan
  • 24. Business Models
  • 25. TEACHING POINT Why? Business Model versus Business Plan
  • 26. Business Model versus Business Plan• We are not saying never to a business plan• We are saying, “not first”• Plans are static• Models are dynamic• Planning comes before the plan TEACHING POINT
  • 27. What We Used to Believe Process
  • 28. Product Introduction Model Concept/ Product Alpha/Beta Launch/Seed Round Dev. Test 1st Ship
  • 29. Tradition – Hire Marketing Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding”
  • 30. Tradition – Hire Sales Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build SalesSales • Hire 1st Sales Staff Organization
  • 31. Tradition – Hire Bus Development Concept Product Alpha/Beta Launch/ 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 Channel / Sales • Pick distribution Distribution Channel Business • Hire First • Do deals for FCSDevelopment Bus Dev
  • 32. Tradition – Hire Engineering Concept Product Alpha/Beta Launch/ 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 Channel / Sales • Pick distribution Distribution Channel Business • Hire First • Do deals for FCSDevelopment Bus DevEngineering • Write MRD • Waterfall • Q/A •Tech Pubs
  • 33. Waterfall / Product Management Execution on Two “Knowns” Requirements Product Features: known Design Implementation Verification Customer Problem: known MaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com
  • 34. What We Now Know Process
  • 35. More startups fail froma lack of customers than from afailure of product development
  • 36. Customer Development
  • 37. Agile Development
  • 38. +
  • 39. TEACHING POINT Why? Customer & Agile Development versus Product Launch and Waterfall
  • 40. Customer & Agile Development versus Product Launch and Waterfall• Product Launch process assumes hypotheses are facts• Waterfall development assumes you know: – the customer problem – Entire solution TEACHING POINT
  • 41. What We Used to Believe Organization
  • 42. Hire and Build aFunctional Organization
  • 43. What We Now Know Organization
  • 44. Founders run a Customer Development TeamNo sales, marketing and business development
  • 45. TEACHING POINT Why? Functional Organizations
  • 46. Functional Organizations• An easy trap for startups• Large companies have VP’s of Sales, Marketing & Business Development• I guess we should too• Titles are the same, functions are radically different TEACHING POINT
  • 47. TEACHING POINT How? Business Model Canvas
  • 48. The Canvas in Class• Forces students to articulate all 9 parts of a business model (static)• Used to keep score of customer development progress (dynamic)• Allows visualization of the entrepreneurial process• 9 boxes provides a convenient tempo for weekly classes Different from Osterwalders original intent - strategy TEACHING POINT
  • 49. What’s a Business Model?
  • 50. Value PropositionWhat Are You Building and For Who?
  • 51. Customer Segments Who Are They? Why Would They Buy?
  • 52. TEACHING POINT Multiple Customer Segments
  • 53. Multiple Customer Segments• Might have multiple segments of users• Might have users and payers• Might have 5 or 6 different customers – Medical devices have doctors, hospitals, patient, insurance company, FDA, etc.• For every customer segment you need: – Value proposition – Revenue model – And may have unique channels, cust relationships, etc. TEACHING POINT
  • 54. TEACHING POINT Product/Market Fit Value Proposition + Customer Segment
  • 55. Product/Market FitDoes the Value Proposition MVP match the Customer Segment Archetype? TEACHING POINT
  • 56. ChannelsHow does your Product Get to Customers?
  • 57. Customer RelationshipsHow do you Get, Keep and Grow Customers?
  • 58. TEACHING POINTWe define Customer Relationships as Get, Keep and Grow Different and more actionable than Osterwalder
  • 59. TEACHING POINT
  • 60. Revenue StreamsHow do you Make Money?
  • 61. Key ResourcesWhat are your most important Assets?
  • 62. Key PartnersWho are your Partners and Suppliers?
  • 63. Key ActivitiesWhat’s Most Important for the Business?
  • 64. Cost StructureWhat are the Costs and Expenses
  • 65. TEACHING POINT How? Business Model Canvas Components
  • 66. Canvas Components• We overview all the 9 boxes in the first lecture• Subsequent classes detail each of canvas components• But that’s a sleight of hand• What we are really doing is getting the students to talk to 100 customers in a quarter• The class is not about the lectures• It’s about the work the students do outside the building TEACHING POINT
  • 67. But,Realize They’re Hypotheses
  • 68. 9 Guesses GuessGuess Guess Guess Guess Guess Guess Guess Guess
  • 69. TEACHING POINT How? Customer Development
  • 70. Customer Development• While so far the class looked like an easy business model canvas class …• The class is actually all about Customer Development!• Drawing the canvas hypotheses are easy• Testing them is really, really hard• Just like a startup TEACHING POINT
  • 71. Customer DevelopmentTest the Problem, Then the Solution
  • 72. TEACHING POINT How? Test the problem, then the solution
  • 73. Test the Problem then the Solution• Customer development is about hypothesis testing• It’s why scientists do great in this class• What are you testing? All the nice, neat assumptions in the business model canvas• First, you test basic assumptions• Then, you test the solution itself• Customer discovery and validation is a fairly rigorous process TEACHING POINT
  • 74. Customer Development The Minimum Viable Product
  • 75. TEACHING POINT How? Build the minimum viable product
  • 76. Build the minimum viable product• This is easy if you use Agile development• You build your product iteratively and incrementally• The goal is feedback, learning, insight, orders, etc. with the minimum feature set TEACHING POINT
  • 77. Customer Development The Pivot
  • 78. TEACHING POINT How? The Pivot
  • 79. The Pivot• A core concept of Customer Development• In the past a failure to make “the plan” meant a failure of an individual to execute• In the past we fixed problems and changed strategies by firing executives• Now we first fire the plan• A pivot is a substantive change in one or more business model canvas components• An iteration is a minor change in one or more business model canvas components TEACHING POINT
  • 80. Customer Development Done By the Founders
  • 81. Customer Development Canvas to Keep Score
  • 82. TEACHING POINT How? Keeping Score with the Canvas
  • 83. Keeping Score with the Canvas• A core concept of the class• Weekly updates of the canvas allow the teaching team to visually see customer development process• Visualize the canvas extending in the Z-axis• That axis represents the customer development process over time TEACHING POINT
  • 84. Customer Development Details
  • 85. Customer Development ishow you search for the model
  • 86. Customer Development Physical vs. Web/Mobile Products and Channels
  • 87. Why Do We Do This?
  • 88. Make Your Lives Extraordinary