Business Schools• Made the American Century• Embraced entrepreneurship– Myles Mace HBS 1947, Stanford 1953– But as an activity you execute• Now embracing searchTEACHING POINT
Startups SearchCompanies Execute
Why?Startups are Not Smaller Versions of aLarge CompanySearch versus ExecutionTEACHING POINT
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 donot work in search• Early stage ventures need their own toolsTEACHING POINT
What’s a Startup?
Why?Why a definition of a startup?TEACHING POINT
What’s A StartupA temporary organization designed to search for arepeatable 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 ModelTEACHING POINT
What We Used to BelieveStrategy
Start With an Operating Planand Financial Model
What We Now KnowStrategy
Planning comes before the plan
Why?Business Model versus Business PlanTEACHING POINT
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 planTEACHING POINT
Tradition – Hire MarketingConcept/Seed RoundProductDev.Alpha/BetaTestLaunch/1st Ship- Create MarcomMaterials- Create Positioning- Hire PR Agency- Early Buzz- Create Demand- Launch Event- “Branding”Marketing
Tradition – Hire SalesConcept/Seed RoundProductDev.Alpha/BetaTestLaunch/1st Ship- Create MarcomMaterials- Create Positioning- Hire PR Agency- Early Buzz- Create Demand- Launch Event- “Branding”• Build SalesOrganizationMarketingSales • Hire Sales VP• Hire 1st Sales Staff
Tradition – Hire Bus DevelopmentConcept ProductDev.Alpha/BetaTestLaunch/1st Ship- Create MarcomMaterials- Create Positioning- Hire PR Agency- Early Buzz- Create Demand- Launch Event- “Branding”• Hire Sales VP• Pick distributionChannel• Build Sales Channel /DistributionMarketingSales• Hire FirstBus Dev• Do deals for FCSBusinessDevelopment
Tradition – Hire EngineeringConcept ProductDev.Alpha/BetaTestLaunch/1st Ship- Create MarcomMaterials- Create Positioning- Hire PR Agency- Early Buzz- Create Demand- Launch Event- “Branding”• Hire Sales VP• Pick distributionChannel• Build Sales Channel /DistributionMarketingSales• Hire FirstBus Dev• Do deals for FCSBusinessDevelopmentEngineering • Write MRD • Waterfall • Q/A •Tech Pubs
Customer Problem: knownProduct Features: knownWaterfall / Product ManagementExecution on Two “Knowns”RequirementsDesignImplementationVerificationMaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com
What We Now KnowProcess
More startups fail froma lack of customers than from afailure of product development
Why?Customer & Agile Development versusProduct Launch and WaterfallTEACHING POINT
Customer & Agile Development versusProduct Launch and Waterfall• Product Launch process assumes hypotheses are facts• Waterfall development assumes you know:– the customer problem– Entire solutionTEACHING POINT
What We Used to BelieveOrganization
Hire and Build aFunctional Organization
What We Now KnowOrganization
Founders run aCustomer Development TeamNo sales, marketing and businessdevelopment
Why?Functional OrganizationsTEACHING POINT
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 differentTEACHING POINT
How?Business Model CanvasTEACHING POINT
The Canvas in Class• Forces students to articulate all 9 parts of a businessmodel (static)• Used to keep score of customer development progress(dynamic)• Allows visualization of the entrepreneurial process• 9 boxes provides a convenient tempo for weekly classesDifferent from Osterwalders original intent - strategyTEACHING POINT
What’s a Business Model?
Value PropositionWhat Are You Building and For Who?
Customer SegmentsWho Are They?Why Would They Buy?
Multiple Customer SegmentsTEACHING POINT
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, insurancecompany, FDA, etc.• For every customer segment you need:– Value proposition– Revenue model– And may have unique channels, cust relationships, etc.TEACHING POINT
Product/Market FitValue Proposition + Customer SegmentTEACHING POINT
Product/Market FitDoes the Value Proposition MVP matchthe Customer Segment Archetype?TEACHING POINT
TEACHING POINTTHIS IS THE TOOL TO TEST PRODUCT/MARKET FIT
ChannelsHow does your ProductGet to Customers?
Customer RelationshipsHow do you Get, Keep and Grow Customers?
We define Customer Relationshipsas Get, Keep and GrowDifferent and more actionable thanOsterwalderTEACHING POINT
Revenue StreamsHow do you Make Money?
Key ResourcesWhat are your most important Assets?
Key PartnersWho are your Partners and Suppliers?
Key ActivitiesWhat’s Most Important for the Business?
Cost StructureWhat are the Costs and Expenses
How?Business Model Canvas ComponentsTEACHING POINT
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 to100 customers in a quarter• The class is not about the lectures• It’s about the work the students do outside the buildingTEACHING POINT
Customer Development• While so far the class looked like an easy business modelcanvas class …• The class is actually all about Customer Development!• Drawing the canvas hypotheses are easy• Testing them is really, really hard• Just like a startupTEACHING POINT
Customer DevelopmentTest the Problem, Then the Solution
How?Test the problem, then the solutionTEACHING POINT
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 inthe business model canvas• First, you test basic assumptions• Then, you test the solution itself• Customer discovery and validation is a fairly rigorousprocessTEACHING POINT
Customer DevelopmentThe Minimum Viable Product
How?Build the minimum viable productTEACHING POINT
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. withthe minimum feature setTEACHING POINT
Customer DevelopmentThe Pivot
How?The PivotTEACHING POINT
The Pivot• A core concept of Customer Development• In the past a failure to make “the plan” meant a failure ofan individual to execute• In the past we fixed problems and changed strategies byfiring executives• Now we first fire the plan• A pivot is a substantive change in one or more businessmodel canvas components• An iteration is a minor change in one or more businessmodel canvas componentsTEACHING POINT
Customer DevelopmentDone By the Founders
Customer DevelopmentCanvas to Keep Score
How?Keeping Score with the CanvasTEACHING POINT
Keeping Score with the Canvas• A core concept of the class• Weekly updates of the canvas allow the teaching team tovisually see customer development process• Visualize the canvas extending in the Z-axis• That axis represents the customer development processover timeTEACHING POINT
Customer Development ishow you search for the model
Customer DevelopmentPhysical vs. Web/MobileProducts and Channels