Customer Development and the  Business Model<br />July 16, 2011<br />
Welcome to Customer Development<br />Steve Blank<br />Stanford - School of Engineering<br />U.C. Berkeley - Haas School Of...
I Write a Blog  <br />www.steveblank.com<br />
This Talk is Based On<br />Business Model Generation<br />Four Steps to the Epiphany<br />Lean Startup<br />
First -What’s A Startup?<br />Five Types of Startups<br />
Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></...
Feed the family</li></li></ul><li>Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br />...
99.7% of all companies
~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
Large Non-Profit<br />Social Startup<br />Social Entrepreneurship Startups<br /><ul><li>Solve pressing social problems
Social Enterprise: Profitable
Social Innovation: New Stratagies</li></li></ul><li>Large Company Sustaining Innovation<br />Sustaining Innovation<br />Tr...
Known product feature needs</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />L...
New tech, customers, channels</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br /...
Acquire</li></ul>      - IP- Talent<br />      - Product<br />      - Customers<br />      - Business<br />
Scalable<br />Startup<br />Large Company<br />Scalable Startup<br />Search<br />Goal is to solve for:<br />  unknown custo...
Execute<br />Search<br />Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
 Total Available Market > $500m -$1B
 Can grow to $100m/year</li></ul>Scalable Startup<br />
Scalable<br />Startup<br />Large Company<br /><ul><li>Total Available Market > $500m
 Company can grow to $100m/year
 Business model found
 Focused on execution and process
 Typically requires “risk capital”</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> In contrast a scalable...
 Typically needs risk capital
 What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Exit Cr...
 Total Available Market > $500m -$1B
 Can grow to $100m/year</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> VC-backed scalable startups:
 13% of all public companies
 4% of total sales of all U.S. public companies ~$1 trillion</li></ul>Source: Josh Lerner, Harvard: VC and Innovation in E...
Very Different Startup Goals<br />Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br />...
 Company can grow to $100m/year
 Business model found
 Focused on execution and process
 Typically requires “risk capital”</li></li></ul><li>Venture Firms Invest in Scalable Startups<br />Small Business<br />St...
Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br ...
Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br ...
Scalable<br />Startup<br />Large Company<br /><ul><li>Business Model found
 i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />Search <br />...
Next,What’s A Founder?<br />
What You and I Saw<br />
What Michelangelo Saw<br />
What You and I Saw<br />
What Van Gogh Saw<br />
Founders See Things Others Don’t<br />
Founders See Things Others Don’t<br />Founders are Artists.<br />Actually They are Composers.<br />They Create Something F...
Founders See Things Others Don’t<br />They Build a Company By Convincing Others To See What They Do<br />
Founders See Things Others Don’t<br />The Early Employees Who Join Them <br />Are the Performers<br />
I Have a Vision<br />
I Know What Needs to Be Done<br />
Lets Launch a New Product!<br />
Five Ways Founders Fail<br />
#1I Know Who The Customer Is<br />
#2I Know Exactly the Product They Need<br />
#3I Know the Problem They Have<br />
#4We Can Fix It After We Ship It All<br />
#5<br />All I Need to Do is Execute the Plan<br />
Product Introduction Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
Product Introduction Model<br />The Leading Cause of Startup Death<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Be...
Product Introduction Model:Two Implicit Assumptions<br />Customer Problem: known<br />Concept/Seed Round<br />Product Dev....
Tradition – Hire Marketing<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />...
Tradition – Hire Sales<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Cr...
 Hire Sales VP
 Hire 1st  Sales Staff</li></ul>Sales<br />
Tradition – Hire Bus Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Cre...
 Hire Sales VP
 Pick distribution   Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First   Bus Dev
 Do deals for FCS</li></li></ul><li>Tradition – Hire Engineering<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />...
 Hire Sales VP
 Pick distribution   Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First   Bus Dev
 Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
 Waterfall
 Q/A
Tech Pubs</li></li></ul><li>No Business Plan survives first contact with customers<br />
Startups Are Not Smaller Versions of Large Companies<br />
Startups Are Not Smaller Versions of Large Companies<br />Large Companies Execute Known Business Models<br />
Startups Are Not Smaller Versions of Large Companies<br />Startups Search for Unknown Business Models<br />
So Search for a Business Model<br />
The Business Model:<br />Any company can be described in 9 building blocks<br />
CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? r...
REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurrin...
KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />59<br />
KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
value proposition<br />customer relationships<br />key activities<br />customer segments<br />key partners<br />cost struc...
sketch out your business model<br />
But,Realize They’re Hypotheses<br />
9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
How Do Startups Search For A Business Model?<br /><ul><li> The Search isCustomer Development
 The Implementation isAgile Development
 The Sum is the Lean Startup</li></li></ul><li>Customer Development<br />The founders<br />^<br />Get Out of the Building<...
Customer DevelopmentThe Search For the Business Model<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValid...
Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />St...
Test Hypotheses:<br /><ul><li>Product
 Market Type
 Competition</li></ul>Turning Hypotheses to Facts<br />
Test Hypotheses:<br /><ul><li>Problem
 Customer
 User
 Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Crea...
 Customer
 User
 Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
 Market Type
 Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
 (Customer)
 (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</...
 Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><u...
 Customer
 User
 Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
 Market Type
 Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
 (Customer)
 (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><u...
 Validate Business Model</li></li></ul><li>
The Minimum Viable Product (MVP)<br /><ul><li> Smallest feature set that gets you the most …orders, learning, feedback, fa...
MVP + Customer are the first two you need to nail</li></li></ul><li>Testing the MVP<br />Smoke testing with landing pages ...
Testing the MVP (Web Example)<br />Can you get customers to pay for a product that doesn’t yet exist (or barely does)?<br ...
Testing the MVP (Non-Web)<br />Can you get customers to pay for a product that doesn’t yet exist (or barely does)?<br />In...
The Pivot<br /><ul><li>The heart of Customer Development
Iteration without crisis
Fast, agile and opportunistic</li></li></ul><li>How Does This Really Work?Stanford Lean LaunchPad Class<br />
How Does This Really Work?Stanford Lean LaunchPad Class<br />8 Weeks From an Idea to a Business<br />
Pivot ExampleRobotic Weeding<br />Talked 75 Customers in 8 Weeks<br />
Our initial plan<br />Confidential<br />
20 interviews, 6 site visits…We got OUR Boots dirty<br />Weeding<br />Visited two farms in Salinas Valley to better unders...
White Farms, Large Peanut farmer in Georgia
REFCO Farms, large grower in Salinas Valley
Rincon Farms, large grower in Salinas Valley
Small Organic Corn/Soy grower in Nebraska
Heirloom Organics, small owner/operator, Santa Cruz Mts
Two small organic farmers at farmers market
Ag Services of Salinas, Fertilizer applicator</li></ul>Mowing<br />Interviewed:<br /><ul><li>Golf: Stanford Golf course
Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6)
Toro dealer (large mower manufacturer)
User of back-yard mowing system
Maintenance Services for City of Los Altos
Colony Landscaping (Mowing service for stadiums)</li></ul>Confidential<br />
Business Plan Autonomous Vehicles for Mowing & Weeding<br />Dealers sell, installs and supports customer<br />Co. trains d...
Autonomous vehiclesWEEDING<br />Dealers sell, installs and supports customer<br />Co. trains dealers, supports dealers<br ...
1 Week – 1 CarrotBot<br />Confidential<br />
The Business Plan Canvas Updated<br /><ul><li>Technology Design
Marketing
Demo and customer feedback
Farming conventions.
Demo, demo, and demo!!
Proximity is paramount
Organic Farmers
Weeding Service Providers
Conventional Farmers
Cost Reduction
Remove labor force pains
Eliminate bio-waste hazards
Research Labs
Equipment Manufacturers
Distribution Network
Service Providers
IP – Patents
Video Classifier Files
Robust Technology
Dealers
Direct Service
Indirect Service
 … then Dealers
Asset Sale
Direct Service with equipment rental
… then Asset Sale</li></ul>Value-Driven<br />
The Business Plan Canvas Updated<br /><ul><li>Technology Design
Marketing
Demo and customer feedback
Farming conventions.
Demo, demo, and demo!!
Proximity is paramount
Mid/Large Organic Farmers
Agricultural corporations
Weeding Service Providers
Mid/Large Conventional Farmers
Cost Reduction
Remove labor force pains
Eliminate bio-waste hazards
Research Labs
Equipment Manufacturers
Distribution Network
Service Providers
IP – Patents
Video Classifier Files
Robust Technology
Direct Service
Indirect Service
 … then Dealers
Direct Service with equipment rental
($1,500/d; 120d/yr )
Low density: $1,500/d
High density: $6,000/d</li></ul>Value-Driven<br />
World Ag Expo interviews:the need is real and wide spread<br />10+ interviews at show<br />Everyone confirmed the need<br ...
The Business Plan Canvas Updated<br /><ul><li>Technology Design
Marketing
Demo and customer feedback
Farming conventions.
Demo, demo, and demo!!
Proximity is paramount
Mid/Large Organic Farmers
Agricultural corporations
Weeding Service Providers
Mid/Large Conventional Farmers
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Cleantech Open 071611

  1. 1. Customer Development and the Business Model<br />July 16, 2011<br />
  2. 2. Welcome to Customer Development<br />Steve Blank<br />Stanford - School of Engineering<br />U.C. Berkeley - Haas School Of Business<br />www.steveblank.com<br />Twitter: sgblank<br />
  3. 3. I Write a Blog <br />www.steveblank.com<br />
  4. 4. This Talk is Based On<br />Business Model Generation<br />Four Steps to the Epiphany<br />Lean Startup<br />
  5. 5. First -What’s A Startup?<br />Five Types of Startups<br />
  6. 6. Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
  7. 7. Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></ul>- Profitable business<br /><ul><li> Existing team</li></ul>< $1M in revenue<br />Small Business Startups<br /><ul><li>known customer known product
  8. 8. Feed the family</li></li></ul><li>Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M in revenue<br />Small Business Startups<br /><ul><li>5.7 million small businesses in the U.S. <500 employees
  9. 9. 99.7% of all companies
  10. 10. ~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
  11. 11. Large Non-Profit<br />Social Startup<br />Social Entrepreneurship Startups<br /><ul><li>Solve pressing social problems
  12. 12. Social Enterprise: Profitable
  13. 13. Social Innovation: New Stratagies</li></li></ul><li>Large Company Sustaining Innovation<br />Sustaining Innovation<br />Transition<br />Scalable<br />Startup<br />Large Company<br /><ul><li> Existing Market / Known customer
  14. 14. Known product feature needs</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Large Company<br />Disruptive Innovation<br /><ul><li>New Market
  15. 15. New tech, customers, channels</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Large Company<br />Disruptive Innovation<br /><ul><li>Build
  16. 16. Acquire</li></ul> - IP- Talent<br /> - Product<br /> - Customers<br /> - Business<br />
  17. 17. Scalable<br />Startup<br />Large Company<br />Scalable Startup<br />Search<br />Goal is to solve for:<br /> unknown customer and unknown features <br />
  18. 18. Execute<br />Search<br />Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
  19. 19. Total Available Market > $500m -$1B
  20. 20. Can grow to $100m/year</li></ul>Scalable Startup<br />
  21. 21. Scalable<br />Startup<br />Large Company<br /><ul><li>Total Available Market > $500m
  22. 22. Company can grow to $100m/year
  23. 23. Business model found
  24. 24. Focused on execution and process
  25. 25. Typically requires “risk capital”</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> In contrast a scalable startup is designed to grow big
  26. 26. Typically needs risk capital
  27. 27. What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
  28. 28. Total Available Market > $500m -$1B
  29. 29. Can grow to $100m/year</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> VC-backed scalable startups:
  30. 30. 13% of all public companies
  31. 31. 4% of total sales of all U.S. public companies ~$1 trillion</li></ul>Source: Josh Lerner, Harvard: VC and Innovation in Energey<br />
  32. 32. Very Different Startup Goals<br />Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M<br />Scalable<br />Startup<br />Large Company<br /><ul><li> Total Available Market > $500m
  33. 33. Company can grow to $100m/year
  34. 34. Business model found
  35. 35. Focused on execution and process
  36. 36. Typically requires “risk capital”</li></li></ul><li>Venture Firms Invest in Scalable Startups<br />Small Business<br />Startup<br />Scalable<br />Startup<br />Large Company<br />
  37. 37. Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br /> Internet and Mobile Apps<br />
  38. 38. Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br /> Internet and Mobile Apps<br />Sell to larger company<br />
  39. 39. Scalable<br />Startup<br />Large Company<br /><ul><li>Business Model found
  40. 40. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />Search <br />Execute<br />A Startup is a temporary organization used to search for a repeatable and scalable business model <br />
  41. 41. Next,What’s A Founder?<br />
  42. 42. What You and I Saw<br />
  43. 43. What Michelangelo Saw<br />
  44. 44. What You and I Saw<br />
  45. 45. What Van Gogh Saw<br />
  46. 46. Founders See Things Others Don’t<br />
  47. 47. Founders See Things Others Don’t<br />Founders are Artists.<br />Actually They are Composers.<br />They Create Something From Nothing<br />
  48. 48. Founders See Things Others Don’t<br />They Build a Company By Convincing Others To See What They Do<br />
  49. 49. Founders See Things Others Don’t<br />The Early Employees Who Join Them <br />Are the Performers<br />
  50. 50. I Have a Vision<br />
  51. 51. I Know What Needs to Be Done<br />
  52. 52. Lets Launch a New Product!<br />
  53. 53. Five Ways Founders Fail<br />
  54. 54. #1I Know Who The Customer Is<br />
  55. 55. #2I Know Exactly the Product They Need<br />
  56. 56. #3I Know the Problem They Have<br />
  57. 57. #4We Can Fix It After We Ship It All<br />
  58. 58. #5<br />All I Need to Do is Execute the Plan<br />
  59. 59. Product Introduction Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  60. 60. Product Introduction Model<br />The Leading Cause of Startup Death<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  61. 61. Product Introduction Model:Two Implicit Assumptions<br />Customer Problem: known<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br /> Product Features: known<br />
  62. 62. Tradition – Hire Marketing<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br />
  63. 63. Tradition – Hire Sales<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  64. 64. Hire Sales VP
  65. 65. Hire 1st Sales Staff</li></ul>Sales<br />
  66. 66. Tradition – Hire Bus Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Channel / Distribution
  67. 67. Hire Sales VP
  68. 68. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  69. 69. Do deals for FCS</li></li></ul><li>Tradition – Hire Engineering<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Channel / Distribution
  70. 70. Hire Sales VP
  71. 71. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  72. 72. Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
  73. 73. Waterfall
  74. 74. Q/A
  75. 75. Tech Pubs</li></li></ul><li>No Business Plan survives first contact with customers<br />
  76. 76. Startups Are Not Smaller Versions of Large Companies<br />
  77. 77. Startups Are Not Smaller Versions of Large Companies<br />Large Companies Execute Known Business Models<br />
  78. 78. Startups Are Not Smaller Versions of Large Companies<br />Startups Search for Unknown Business Models<br />
  79. 79. So Search for a Business Model<br />
  80. 80. The Business Model:<br />Any company can be described in 9 building blocks<br />
  81. 81. CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
  82. 82. VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
  83. 83. CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
  84. 84. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  85. 85. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  86. 86. KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
  87. 87. KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />59<br />
  88. 88. KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
  89. 89. COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
  90. 90. value proposition<br />customer relationships<br />key activities<br />customer segments<br />key partners<br />cost structure<br />revenue streams<br />key <br />resources<br />channels<br />62<br />images by JAM<br />
  91. 91. sketch out your business model<br />
  92. 92. But,Realize They’re Hypotheses<br />
  93. 93. 9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
  94. 94. How Do Startups Search For A Business Model?<br /><ul><li> The Search isCustomer Development
  95. 95. The Implementation isAgile Development
  96. 96. The Sum is the Lean Startup</li></li></ul><li>Customer Development<br />The founders<br />^<br />Get Out of the Building<br />
  97. 97. Customer DevelopmentThe Search For the Business Model<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Pivot<br />
  98. 98. Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Stop selling, start listening<br />Test your hypotheses<br />Continuous Discovery<br />Done by founders<br />
  99. 99. Test Hypotheses:<br /><ul><li>Product
  100. 100. Market Type
  101. 101. Competition</li></ul>Turning Hypotheses to Facts<br />
  102. 102. Test Hypotheses:<br /><ul><li>Problem
  103. 103. Customer
  104. 104. User
  105. 105. Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  106. 106. Customer
  107. 107. User
  108. 108. Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
  109. 109. Market Type
  110. 110. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  111. 111. (Customer)
  112. 112. (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  113. 113. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  114. 114. Customer
  115. 115. User
  116. 116. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  117. 117. Market Type
  118. 118. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  119. 119. (Customer)
  120. 120. (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  121. 121. Validate Business Model</li></li></ul><li>
  122. 122. The Minimum Viable Product (MVP)<br /><ul><li> Smallest feature set that gets you the most …orders, learning, feedback, failure…
  123. 123. MVP + Customer are the first two you need to nail</li></li></ul><li>Testing the MVP<br />Smoke testing with landing pages using AdWords<br />In-product split-testing<br />Prototypes (particularly for hardware)<br />Removing features<br />Continued customer discovery and validation<br />Surveys<br />Interviews<br />
  124. 124. Testing the MVP (Web Example)<br />Can you get customers to pay for a product that doesn’t yet exist (or barely does)?<br />Interview customers to make sure they have a matching core problem<br />Set up web site landing page to test for conversion<br />See what offers are required to get customers to use the product (e.g. prizes, payment)<br />Use problem definition as described by customers to identify key word list – plug into Google search traffic estimator - high traffic means there is problem awareness<br />Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through<br />
  125. 125. Testing the MVP (Non-Web)<br />Can you get customers to pay for a product that doesn’t yet exist (or barely does)?<br />Interview customers to make sure they have a matching core problem<br />Set up web site landing page to test for conversion<br />Set up a Lighthouse Customer Program where potential customers pay to get early access to product prototypes<br />
  126. 126. The Pivot<br /><ul><li>The heart of Customer Development
  127. 127. Iteration without crisis
  128. 128. Fast, agile and opportunistic</li></li></ul><li>How Does This Really Work?Stanford Lean LaunchPad Class<br />
  129. 129. How Does This Really Work?Stanford Lean LaunchPad Class<br />8 Weeks From an Idea to a Business<br />
  130. 130. Pivot ExampleRobotic Weeding<br />Talked 75 Customers in 8 Weeks<br />
  131. 131. Our initial plan<br />Confidential<br />
  132. 132. 20 interviews, 6 site visits…We got OUR Boots dirty<br />Weeding<br />Visited two farms in Salinas Valley to better understand problem<br />Interviewed:<br /><ul><li>Bolthouse Farms, Large Agri-Industry in Bakersfield
  133. 133. White Farms, Large Peanut farmer in Georgia
  134. 134. REFCO Farms, large grower in Salinas Valley
  135. 135. Rincon Farms, large grower in Salinas Valley
  136. 136. Small Organic Corn/Soy grower in Nebraska
  137. 137. Heirloom Organics, small owner/operator, Santa Cruz Mts
  138. 138. Two small organic farmers at farmers market
  139. 139. Ag Services of Salinas, Fertilizer applicator</li></ul>Mowing<br />Interviewed:<br /><ul><li>Golf: Stanford Golf course
  140. 140. Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6)
  141. 141. Toro dealer (large mower manufacturer)
  142. 142. User of back-yard mowing system
  143. 143. Maintenance Services for City of Los Altos
  144. 144. Colony Landscaping (Mowing service for stadiums)</li></ul>Confidential<br />
  145. 145. Business Plan Autonomous Vehicles for Mowing & Weeding<br />Dealers sell, installs and supports customer<br />Co. trains dealers, supports dealers<br />- Innovation<br />- Customer Education<br />- Dealer training<br />Mowing<br />- Owners of public or commercially used green spaces (e.g. golf courses)<br />- Landscaping service provider<br />Weeding<br />- Farmers with manual weeding operations<br />We reduce operating cost<br />- Labor reduction<br />- Better utilization of assets (eg mow or weed at nights)<br />- Improved performance (less rework, food safety)<br />- Dealers (Mowing and Ag)<br />- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)<br />- Research labs<br />- Mowing Dealers<br />- Ag Dealers<br />Engineers on Autonomous vehicles, GPS, path-planning<br />Dealer discount <br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Asset sale<br />Our revenue stream derives from selling the equipment<br />
  146. 146. Autonomous vehiclesWEEDING<br />Dealers sell, installs and supports customer<br />Co. trains dealers, supports dealers<br />- Innovation<br />- Customer Education<br />- Dealer training<br />- Low density vegetable growers<br />- High density vegetable growers<br />- Thinning operations<br />- Conventional vegetables<br />We reduce operating cost<br />- Labor reduction (100 to 1)<br />- Reduced risk of contamination<br />- Mitigate labor availability concerns<br />- Ag Dealers<br />- Ag Service providers<br />- Research labs<br />- Ag Dealers<br />- Ag Service providers<br />Engineers on Machine Vision<br />Two problems:<br />- Identification<br />- Elimination<br />Dealer discount <br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Asset sale<br />Our revenue stream derives from selling the equipment<br />
  147. 147. 1 Week – 1 CarrotBot<br />Confidential<br />
  148. 148. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  149. 149. Marketing
  150. 150. Demo and customer feedback
  151. 151. Farming conventions.
  152. 152. Demo, demo, and demo!!
  153. 153. Proximity is paramount
  154. 154. Organic Farmers
  155. 155. Weeding Service Providers
  156. 156. Conventional Farmers
  157. 157. Cost Reduction
  158. 158. Remove labor force pains
  159. 159. Eliminate bio-waste hazards
  160. 160. Research Labs
  161. 161. Equipment Manufacturers
  162. 162. Distribution Network
  163. 163. Service Providers
  164. 164. IP – Patents
  165. 165. Video Classifier Files
  166. 166. Robust Technology
  167. 167. Dealers
  168. 168. Direct Service
  169. 169. Indirect Service
  170. 170. … then Dealers
  171. 171. Asset Sale
  172. 172. Direct Service with equipment rental
  173. 173. … then Asset Sale</li></ul>Value-Driven<br />
  174. 174. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  175. 175. Marketing
  176. 176. Demo and customer feedback
  177. 177. Farming conventions.
  178. 178. Demo, demo, and demo!!
  179. 179. Proximity is paramount
  180. 180. Mid/Large Organic Farmers
  181. 181. Agricultural corporations
  182. 182. Weeding Service Providers
  183. 183. Mid/Large Conventional Farmers
  184. 184. Cost Reduction
  185. 185. Remove labor force pains
  186. 186. Eliminate bio-waste hazards
  187. 187. Research Labs
  188. 188. Equipment Manufacturers
  189. 189. Distribution Network
  190. 190. Service Providers
  191. 191. IP – Patents
  192. 192. Video Classifier Files
  193. 193. Robust Technology
  194. 194. Direct Service
  195. 195. Indirect Service
  196. 196. … then Dealers
  197. 197. Direct Service with equipment rental
  198. 198. ($1,500/d; 120d/yr )
  199. 199. Low density: $1,500/d
  200. 200. High density: $6,000/d</li></ul>Value-Driven<br />
  201. 201. World Ag Expo interviews:the need is real and wide spread<br />10+ interviews at show<br />Everyone confirmed the need<br />Robocrop, UK based, crude competitor sells for $171 K<br />Revenue Stream<br />Mid to small growers prefer a service<br />Large growers prefer to buy, but OK with service until technology is proven<br />Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)<br />Confidential<br />
  202. 202. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  203. 203. Marketing
  204. 204. Demo and customer feedback
  205. 205. Farming conventions.
  206. 206. Demo, demo, and demo!!
  207. 207. Proximity is paramount
  208. 208. Mid/Large Organic Farmers
  209. 209. Agricultural corporations
  210. 210. Weeding Service Providers
  211. 211. Mid/Large Conventional Farmers
  212. 212. Research Labs
  213. 213. Equipment Manufacturer
  214. 214. Distribution Network
  215. 215. Service Providers
  216. 216. 2 or 3 Key Farms
  217. 217. Cost Reduction
  218. 218. Remove labor force pains
  219. 219. Eliminate bio-waste hazards
  220. 220. IP – Patents
  221. 221. Video Classifier Files
  222. 222. Robust Technology
  223. 223. Direct Service
  224. 224. Indirect Service
  225. 225. … then Dealers
  226. 226. Direct Service with equipment rental
  227. 227. Low density: $1,500/d
  228. 228. High density: $6,000/d</li></ul>Value-Driven<br /><ul><li> R&D
  229. 229. Bill of Materials
  230. 230. Training & Service
  231. 231. Sales</li></li></ul><li>Autonomous weeding - Final<br />Direct<br />- Provide high quality service at competitive price<br />- Innovation<br />- Customer Education<br />- Dealer training<br />- Low density vegetable growers<br />- High density vegetable growers<br />- Thinning operations<br />- Conventional vegetables<br />We reduce operating cost<br />- Labor reduction (100 to 1)<br />- Reduced risk of contamination<br />- Mitigate labor availability concerns<br />- Ag Service providers<br />- Research Institutes (eg UC Davis, Laser Zentrum Hannover)<br />- 3-4 key farms<br />Direct <br />- Alliance with service providers<br />- Eventually sell through dealers<br />Engineers on Machine Vision<br />Two problems:<br />- Identification<br />- Elimination<br />Costs for service provision<br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Service provision<br />- Charge by the acre with modifier according to weed density <br />- Eventually move to asset sale<br />
  232. 232. Personal Libraries<br />
  233. 233. Insight: No more bookshelves<br />eBooks+150% YoY ‘10<br />Printed Books <br />-20% YoY ‘10<br />
  234. 234. Version 1.0: Personal Libraries<br />
  235. 235. Original Idea: Personal Digital Libraries<br />Import, organize and share thousands of digital papers<br />
  236. 236. something-something-something.com<br />Original idea<br />Invincible Business Model: Version 1.0<br />SHORT TERMResearchers<br />Lawyers<br />Scientists <br />LONG TERMAvid book readers<br />Professionals <br />FB/TW posts from users you know<br />Company blog, FB, TW, support forums<br />Import, organize and share thousands of papers<br />Targeted marketing<br />Product development<br />Constant iteration & testing<br />Libraries, Universities, Research Centers<br />Bloggers and media targeting customer segment<br />Academic Database providers<br />Affiliate program<br />SEO/SEM/SM<br />IE/FF/Chrome App Stores<br />Developers<br />Marketers<br />Affiliate program fees<br />Licensing<br />Subscription fees<br />Ad revenue<br />AWS Infrastructure<br />SEM<br />Eng & Marketing OpEx<br />
  237. 237. Here’s What We Did<br />Version 1.0: Personal Libraries<br />
  238. 238. Got out of the building<br />
  239. 239. Got out of the building<br /><ul><li>100+ Interviews</li></ul>Professors, Litigators, IP lawyers, Post-docs, PhD researchers, Engineering Students, Law Students…<br />
  240. 240. Got out of the building<br /><ul><li>100+ Interviews
  241. 241. Extensive Surveys</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  242. 242. Extensive Surveys
  243. 243. 33,000+ Adwords</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  244. 244. Extensive Surveys
  245. 245. 33,000+ Adwords
  246. 246. Compete Review</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  247. 247. Extensive Surveys
  248. 248. 33,000+ Adwords
  249. 249. Compete Review
  250. 250. Market Sizing</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  251. 251. Extensive Surveys
  252. 252. 33,000+ Adwords
  253. 253. Compete Review
  254. 254. Market Sizing
  255. 255. 50 bloggers</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  256. 256. Extensive Surveys
  257. 257. 33,000+ Adwords
  258. 258. Compete Review
  259. 259. Market Sizing
  260. 260. 50 bloggers
  261. 261. 6 Social Networks</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  262. 262. Extensive Surveys
  263. 263. 33,000+ Adwords
  264. 264. Compete Review
  265. 265. Market Sizing
  266. 266. 50 bloggers
  267. 267. 6 Social Networks
  268. 268. Usability Tests</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  269. 269. Extensive Surveys
  270. 270. 33,000+ Adwords
  271. 271. Compete Review
  272. 272. Market Sizing
  273. 273. 50 bloggers
  274. 274. 6 Social Networks
  275. 275. Usability Tests
  276. 276. Rapid Iteration</li></li></ul><li>Here’s What We Found<br />Version 1.0: Personal Libraries<br />
  277. 277. Here's what we found: Version 1.0<br />A great business if we had more users…<br />GOOD<br /><ul><li>Subscriptions Rock</li></li></ul><li>Here's what we found: Version 1.0<br />Shorter pages raise conversions 80%<br />GOOD<br /><ul><li>Subscriptions Rock
  278. 278. Pipelines Optimize</li></li></ul><li>Here's what we found: Version 1.0<br />Sites will feature your service<br />GOOD<br /><ul><li>Subscriptions Rock
  279. 279. Pipelines Optimize
  280. 280. The Web Listens</li></li></ul><li>Here's what we found: Version 1.0<br />GOOD<br /><ul><li>Subscriptions Rock
  281. 281. Pipelines Optimize
  282. 282. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap</li></ul>Teaching team saw pattern in our data<br />
  283. 283. Run away from this customer as fast as possible. <br />
  284. 284. Run away from this customer as fast as possible. <br />They don’t want to spend money and will incur infinite support and infinite cost.<br />
  285. 285. Here's what we found: Version 1.0<br />Working for peanuts, and hitting wild product success leads to economic failure<br />GOOD<br /><ul><li>Subscriptions Rock
  286. 286. Pipelines Optimize
  287. 287. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap
  288. 288. Negative Margins</li></li></ul><li>Here's what we found: Version 1.0<br />GOOD<br /><ul><li>Subscriptions Rock
  289. 289. Pipelines Optimize
  290. 290. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap
  291. 291. Negative Margins
  292. 292. ECM = Boring</li></ul>No adjacent pivots worked for the team<br />
  293. 293. Version 2.0: Trusted Advice<br />
  294. 294. something-something-something.com<br />Original idea<br />Invincible Business Model: Version 2.0<br />Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)<br />FB/TW posts from users you know<br />Company blog, FB, TW accounts<br />Discover online goods recommended by friends at the lowest possible price from trusted vendors<br />Developing trusted advice and advisors<br />Web marketing <br />Affiliate partnerships<br />Constant iteration & testing<br />Bloggers and Media targeting customer segment<br />Retail marketing partners<br />IE/FF/Chrome teams<br />Affiliate Program Providers<br />Affiliate program<br />SEO/SEM/SM<br />IE/FF/Chrome App Stores<br />Developers<br />Marketers<br />Content Library<br />Install base<br />Readership base<br />Affiliate program fees<br />Licensing<br />Subscription fees<br />Ad revenue<br />AWS Infrastructure<br />SEM<br />Eng & Marketing OpEx<br />
  295. 295. New Hypotheses<br />
  296. 296. Here’s What We Did<br />Version 2.0: Trusted Advice<br />
  297. 297. Got out of the building, again<br /><ul><li>40+ Interviews</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  298. 298. Extensive Surveys</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  299. 299. Extensive Surveys
  300. 300. Landing Page Tests</li></ul>Landing pages tested on affluent, career aged professionals, approximately 70/30 male/female, N=800+<br />
  301. 301. Got out of the building, again<br /><ul><li>40+ Interviews
  302. 302. Extensive Surveys
  303. 303. Landing Page Tests
  304. 304. Market Research</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  305. 305. Extensive Surveys
  306. 306. Landing Page Tests
  307. 307. Market Research
  308. 308. Compete Research</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  309. 309. Extensive Surveys
  310. 310. Landing Page Tests
  311. 311. Market Research
  312. 312. Compete Research
  313. 313. Revenue Analysis</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  314. 314. Extensive Surveys
  315. 315. Landing Page Tests
  316. 316. Market Research
  317. 317. Compete Research
  318. 318. Revenue Analysis
  319. 319. Two Prototypes</li></ul>Insidely.com<br />wantio.com<br />
  320. 320. Got out of the building, again<br /><ul><li>40+ Interviews
  321. 321. Extensive Surveys
  322. 322. Landing Page Tests
  323. 323. Market Research
  324. 324. Compete Research
  325. 325. Revenue Analysis
  326. 326. Two Prototypes
  327. 327. Refined Personas</li></li></ul><li>Customer Segment: Professional-class consumers shopping frequently online<br /> Pat the Professional<br />Upwardly mobile professional (some Grad Students)<br />Salary: $40,000 – 150,000/year<br />Finance, Consulting, PR, Marketing<br />Follows fashion/technology trends<br />Spends $1-15K on discretionary items online<br />Purchased online in last 30 days<br />Demographics<br /><ul><li>Male/female, aged 18-35
  328. 328. Minimum bachelors from expensive school</li></ul>Traits:<br /><ul><li>Ideas from blogs & shopping websites
  329. 329. Values celebrity trends & friends’ opinions
  330. 330. Wants high ticket items at lowest price
  331. 331. Event-driven shopper—new release or sale</li></ul>Motivation<br /><ul><li>Craves new products
  332. 332. Hates tedious work
  333. 333. Identifies as influencer among friends
  334. 334. Fears being cheated online</li></ul>Behavior<br /><ul><li>Spends 5 hour+ monthly hearing about products
  335. 335. Shares online and in person about products he loves</li></ul>Budget<br /><ul><li>$2-10K+/year in discretionary online purchases</li></ul>“The XXX is awesome, I really want one. I know I just bought the YYY, but it’s probably time to upgrade.” <br />~5.9M “Pat the Professionals” in US<br />Drawn from top 1/3 of 17.8M frequent online shoppers<br />17.8M based on 40.2M Professionals (2008 Census) * 0.762 US Internet Penetration (Nielsen 2010Q1) * 0.58 consumers shopping online in last month (Nielsen 2010Q1) <br />Online Recommendation Market Opportunity (conservative strawman #s)<br />Assuming 10% share, 5% affiliate fees<br />Top Shoppers (~$7B/year spend): ~ $35M/year <br />Professional-class frequent shoppers (~$1.8B/year): ~ $9M/year<br />Other Professional-class shoppers ($0.7B/year): ~3.5M/year <br />Source: US Bureau of Labor Statistics<br />
  336. 336. Version 2.0: Trusted Advice<br />Top ~6M US Influentials (~$9B/year)<br />
  337. 337. something-something-something.com<br />Original idea<br />Invincible Business Model: Version 2.0<br />Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)<br />FB/TW posts from users you know<br />Company blog, FB, TW accounts<br />Discover online goods recommended by friends at the lowest possible price from trusted vendors<br />Developing trusted advice and advisors<br />Web marketing <br />Affiliate partnerships<br />Constant iteration & testing<br />Bloggers and Media targeting customer segment<br />Retail marketing partners<br />IE/FF/Chrome teams<br />Affiliate Program Providers<br />Affiliate program<br />SEO/SEM/SM<br />IE/FF/Chrome App Stores<br />Developers<br />Marketers<br />Content Library<br />Install base<br />Readership base<br />Affiliate program fees<br />Licensing<br />Subscription fees<br />Ad revenue<br />AWS Infrastructure<br />SEM<br />Eng & Marketing OpEx<br />
  338. 338. Here’s What We Found<br />Version 2: Trusted Advice<br />
  339. 339. Findings on "Trusted Advice"<br />GOOD<br /><ul><li>Fast Interest</li></ul>Insidely.com<br />Trusted advice site for <br />Silicon Valley/Stanford MBAs<br />Launched 2/15<br />425 visitors by 2/28<br />
  340. 340. Findings on "Trusted Advice"<br />Ranked #6 by Google for “Stanford Admissions Books”<br />GOOD<br /><ul><li>Fast Interest</li></li></ul><li>Findings on "Trusted Advice"<br />GOOD<br /><ul><li>Fast Interest
  341. 341. High Conversion</li></ul>43% clickthrough<br />on Top Admissions Books for Stanford MBAs article<br />Compare to 0.5% clickthrough on ads<br />~100x difference<br />
  342. 342. Findings on "Trusted Advice"<br />Positive results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  343. 343. High Conversion
  344. 344. Needs Addressed </li></ul>See videos at http://factnote.com/c/e245<br />
  345. 345. Findings on "Trusted Advice"<br />Positive results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  346. 346. High Conversion
  347. 347. Needs Addressed </li></ul>Super easy to install and use.<br />I really did enjoy it! <br />Great idea! I will keep the extension installed because I do think this is practical!<br />I could see myself using this regularly<br />
  348. 348. Findings on "Trusted Advice"<br />Some negative results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  349. 349. High Conversion
  350. 350. Needs Addressed </li></ul>BAD<br /><ul><li>Missing Features</li></ul>See videos at http://factnote.com/c/e245<br />
  351. 351. Findings on "Trusted Advice"<br />Some negative results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  352. 352. High Conversion
  353. 353. Needs Addressed </li></ul>BAD<br /><ul><li>Missing Features</li></ul>I was a little frustrated when it didn’t find the item I was looking for<br />I can find more thorough price comparisons elsewhere…<br />I usually don’t shop in Chrome, so that’s an inconvenience.<br />
  354. 354. Findings on "Trusted Advice"<br />MBA Exchange spams us out of Google<br />GOOD<br /><ul><li>Fast Interest
  355. 355. High Conversion
  356. 356. Needs Addressed </li></ul>BAD<br /><ul><li>Missing Features
  357. 357. SEO Battle</li></li></ul><li>Here’s Where We Ended Up <br />Version 2.1: Trusted Advice<br />
  358. 358. The adventure continuesTrusted Advice 2.0<br />Protection against SEO-spammers<br />Next Experiments: <br /><ul><li>Trusted Lead Gen
  359. 359. Trusted Advice website powered by Shopping Add-in</li></li></ul><li>something-something-something.com<br />Original idea<br />Invincible Business Model: Version 3.0<br />PAT THE PROFESSIONALUpwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)<br />FB/TW posts from users you know<br />Company blog, FB, TW accounts<br />TRUSTED ADVICE Discover online goods recommended by friends at the lowest possible price from trusted vendors<br />Foil advertorial spammers polluting the Interweb with toxic pseudo-content<br />Developing trusted advice and advisors<br />Web marketing <br />Affiliate partnerships<br />Constant iteration & testing<br />Bloggers and Media targeting customer segment<br />Retail marketing partners<br />IE/FF/Chrome teams<br />Affiliate Program Providers<br />Affiliate program<br />SEO/SEM/SM<br />IE/FF/Chrome App Stores<br />Developers<br />Marketers<br />Content Library<br />Install base<br />Readership base<br />Affiliate program fees<br />Licensing<br />Subscription fees<br />Ad revenue<br />AWS Infrastructure<br />SEM<br />Eng & Marketing OpEx<br />
  360. 360. What We Learned<br /><ul><li>Potential for disruption abounds</li></li></ul><li>What We Learned<br /><ul><li>Potential for disruption abounds
  361. 361. Life is short, focus on big markets</li></li></ul><li>What We Learned<br /><ul><li>Potential for disruption abounds
  362. 362. Life is short, focus on big markets
  363. 363. All we need is to be relentless</li></li></ul><li>Blog Your Progress<br />
  364. 364. How?<br />Customer Development<br />The Process<br />Narrative<br />Interviews<br />Surveys<br />Videos<br />Prototypes<br />Business Model Canvas<br />Scorekeeping<br />Real-time Feedback<br />Physical Reality Checks<br />Skype<br />Face-to-face<br />
  365. 365. We Made Students Blog Their Progress<br />It Changed Everything<br />
  366. 366. Interview<br />
  367. 367. Photos<br />Videos<br />
  368. 368. Surveys<br />
  369. 369. Interview<br />& Photos<br />
  370. 370. Competitive Analysis<br />
  371. 371. Key Findings<br />
  372. 372. A/B Test Results<br />
  373. 373. Key Question<br />
  374. 374. Strategy<br />
  375. 375. Business Model Canvas as the Scorecard<br />
  376. 376.
  377. 377. Business Canvas Change Progress <br />1<br />
  378. 378. Business Canvas Change Progress <br />2<br />
  379. 379. Business Canvas Change Progress <br />3<br />
  380. 380. Business Canvas Change Progress <br />4<br />
  381. 381. Business Canvas Change Progress <br />5<br />
  382. 382. Business Canvas Change Progress <br />6<br />
  383. 383. Business Canvas Change Progress <br />7<br />
  384. 384. SidebarMarket Type<br />
  385. 385. Product Introduction Conundrum<br />Product introductions aren’t predictable<br />Why?<br />Is it the people that are different?<br />Is it the product that are different?<br />Are there different “types” of startups?<br />
  386. 386. Three Markets Types<br />Market Type changes everything<br />Sales, marketing and business development differ radically by market type<br />
  387. 387. Market Type Changes Everything<br />Customers<br /><ul><li> Needs
  388. 388. Adoption</li></ul>Market<br />Market Size<br />Cost of Entry<br />Launch Type<br />Competitive Barriers<br />Positioning<br />Sales<br />Sales Model<br />Margins<br />Sales Cycle<br />Chasm Width<br />Finance<br /><ul><li> Ongoing Capital
  389. 389. Time to Profitability</li></li></ul><li>Three Types of Markets<br />Existing Market<br />Faster/Better = High end<br />Resegmented Market<br />Niche = marketing/branding driven<br />Cheaper = low end<br />New Market<br />Cheaper/good enough = creates a new class of product/customer<br />Innovative/never existed before<br />
  390. 390. Carpe Diem<br />www.steveblank.com<br />
  391. 391. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  392. 392. Market Size<br />
  393. 393. Market/Opportunity Analysis<br />How Big is It?: Market/Opportunity Analysis<br />Identify a Customer and Market Need<br />Size the Market<br />Competitors<br />Growth Potential<br />
  394. 394. How Big is the Pie?Total Available Market<br />Total Available Market<br /><ul><li>How manypeople would want/needthe product?
  395. 395. How large is the market be (in $’s) if they all bought?
  396. 396. How many units would that be?</li></ul>How Do I Find Out?<br /><ul><li>Industry Analysts – Gartner, Forrester
  397. 397. Wall Street Analysts – Goldman, Morgan</li></li></ul><li>How Big is My Slice?Served Available Market<br /><ul><li>How many people need/can use product?
  398. 398. How many people have the money to buy the product
  399. 399. How large would the market be (in $’s) if they all bought?
  400. 400. How many units would that be?</li></ul>How Do I Find Out?<br /><ul><li>Talk to potential customers</li></ul>Served Available Market<br />TotalAvailableMarket<br />
  401. 401. How Much Can I Eat?Target Market<br /><ul><li>Who am I going to sell to in year 1, 2 & 3?
  402. 402. How many customers is that?
  403. 403. How largeis the market be (in $’s) if they all bought?
  404. 404. How many units would that be?</li></ul>How Do I Find Out?<br /><ul><li>Talk to potential customers
  405. 405. Identify and talk to channel partners
  406. 406. Identify and talk to competitors</li></ul>TotalAvailableMarket<br />ServedAvailableMarket<br />Target Market<br />
  407. 407. SegmentationIdentification of groups most likely to buy<br />TotalAvailableMarket<br /><ul><li>Geographic
  408. 408. Demographic
  409. 409. Psychographic variables
  410. 410. Behavioral variables
  411. 411. Channel
  412. 412. etc…</li></ul>ServedAvailableMarket<br />Target Market<br />182<br />
  413. 413. Market Size: Summary<br />Market Size Questions:<br />How big can this market be? <br />How much of it can we get?<br />Market growth rate<br />Market structure (Mature or in flux?)<br />Most important: Talk to Customers and Sales Channel<br />Next important: Market size by competitive approximation<br />Wall Street analyst reports are great<br />And : Market research firms Like Forester, Gartner<br />
  414. 414. CUSTOMER SEGMENTS<br />which customers and users are you serving? which jobs do they really want to get done?<br />images by JAM<br />
  415. 415. Customers<br />
  416. 416. Corporate? Consumer?<br />Business to Business (B to B)<br />Use or buy inside a company<br />Business to Consumer (B to C)<br />Use or buy for themselves<br />Business to Business to Consumer (B to B to C)<br />Sell a business to get to a consumer<br />Other Multi-sided Markets with multiple customers<br />
  417. 417. Corporate Customers<br />Business to Business (B to B)<br />
  418. 418. What do they want you to do?<br />Increase revenue?<br />Decrease costs?<br />Get them new customers?<br />Keep up with or pass competitors?<br />How important is it?<br />
  419. 419. Market Type & Ignoring Customers<br />Existing Market? <br />Resegmenting an Existing Market?<br />niche or low cost<br />New Market?<br />When do I ignore customer feedback?<br />
  420. 420. Who’s the Customer in a Company?<br />User?<br />Influencer?<br />Recommender?<br />Decision Maker?<br />Economic Buyer?<br />Saboteur?<br />Archetypes for each?<br />
  421. 421. How Do They Interact to Buy?<br />Organization Chart<br />Influence Map<br />Sales Road Map<br />
  422. 422. Pass/Fail Signals & Experiments<br />How do you test interest?<br />Where do you test interest?<br />What kind of experiments can you run?<br />How many do you test?<br />
  423. 423. How Do They Hear About You?<br />Demand Creation<br />Network effect<br />Sales<br />
  424. 424. Consumer Customers<br />Business to Consumer (B to C)<br />
  425. 425. What do they want you to do?<br />Does it entertain them?<br />Does it connect them with others?<br />Does it make their lives easier?<br />Does it satisfy a basic need?<br />How important is it?<br />Can they afford it?<br />
  426. 426. Market Type & Ignoring Customers<br />Existing Market? <br />Resegmenting an Existing Market?<br />niche or low cost<br />New Market?<br />When do I ignore customer feedback?<br />
  427. 427. Consumer Customers<br />Do they buy it by themselves?<br />Do they need approval of others?<br />Do they use it alone or with others?<br />
  428. 428. How Do They Decide to Buy?<br />Demand Creation<br />Viral?<br />SEO/SEM<br />Network effect?<br />AARRR (Dave McClure)<br />
  429. 429. Pass/Fail Signals & Experiments<br />How do you test interest?<br />Where do you test interest?<br />What kind of experiments can you run?<br />How many do you test?<br />
  430. 430. The Consumer Sales Channel<br />A product that’s bits can use the web<br />But getting a physical consumer product into retail distribution is hard<br />Is Wal-Mart a customer?<br />More next week<br />
  431. 431. Multi-Sided Markets<br />Business to Business to Consumer <br />(B to B to C)<br />
  432. 432. Who’s The Customer?<br />Consumer End Users, Corporate Customers Pay<br />Multiple Consumers<br />Etc.<br />
  433. 433. Multiple Customer Segments<br />Each has its own Value Proposition<br />Each has its own Revenue Stream<br />One segment cannot exist without the other<br />Which one do you start with?<br />
  434. 434. Customer Relationships<br />Get – Keep - Grow<br />
  435. 435. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  436. 436. “Get Customers” Funnel<br />$<br />Acquire<br />Activate<br />Getting Customers – Virtual Channel<br />
  437. 437. Earned and <br />Paid Media<br />PR<br />“Get Customers” Funnel<br />Viral Mktg<br />SEO<br />$<br />SEM/PPC<br />Acquire<br />Activate<br />Blogs/Website<br />Affiliate Mktg<br />Advertising<br />Tradeshows<br />Getting Customers – Virtual Channel<br />
  438. 438. “Get Customers” Funnel<br />Interest<br />$<br />Awareness<br />Consideration<br />Purchase <br />Getting Customers – Physical Channel<br />
  439. 439. Getting Customers – Physical Channel<br />Earned and <br />Paid Media<br />“Get Customers” Funnel<br />PR<br />Product Reviews<br />$<br />Awareness<br />Tradeshows<br />Interest<br />Purchase <br />Consideration<br />Blogs/Website<br />Advertising<br />
  440. 440. Earned and<br />Paid Media<br />Loyalty Programs<br />Get Customers<br />product updates <br />Awareness<br />Keep Customers<br />Consideration<br />Purchase <br />Interest<br />Customer check-in calls<br />Customer satisfaction survey<br />Keeping Customers<br />
  441. 441. Earned and<br />Paid Media<br />Grow Customers<br />Get Customers<br />product updates <br />Loyalty Programs<br />$<br />Awareness<br />Up-Sell<br />Consideration<br />$<br />UnBundling<br />Keep Customers<br />Cross-sell<br />Purchase <br />Interest<br />Referrals<br />$<br />Customer check-in calls<br />customer satisfaction survey<br />Growing Customers<br />
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