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Cleantech Open 071611
Cleantech Open 071611
Cleantech Open 071611
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Cleantech Open 071611

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  • 1. Customer Development and the Business Model<br />July 16, 2011<br />
  • 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. I Write a Blog <br />www.steveblank.com<br />
  • 4. This Talk is Based On<br />Business Model Generation<br />Four Steps to the Epiphany<br />Lean Startup<br />
  • 5. First -What’s A Startup?<br />Five Types of Startups<br />
  • 6. Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
  • 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. 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. 99.7% of all companies
  • 10. ~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
  • 11. Large Non-Profit<br />Social Startup<br />Social Entrepreneurship Startups<br /><ul><li>Solve pressing social problems
  • 12. Social Enterprise: Profitable
  • 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. 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. 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. Acquire</li></ul> - IP- Talent<br /> - Product<br /> - Customers<br /> - Business<br />
  • 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. Execute<br />Search<br />Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
  • 19. Total Available Market > $500m -$1B
  • 20. Can grow to $100m/year</li></ul>Scalable Startup<br />
  • 21. Scalable<br />Startup<br />Large Company<br /><ul><li>Total Available Market > $500m
  • 22. Company can grow to $100m/year
  • 23. Business model found
  • 24. Focused on execution and process
  • 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. Typically needs risk capital
  • 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. Total Available Market > $500m -$1B
  • 29. Can grow to $100m/year</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> VC-backed scalable startups:
  • 30. 13% of all public companies
  • 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. 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. Company can grow to $100m/year
  • 34. Business model found
  • 35. Focused on execution and process
  • 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. 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. 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. Scalable<br />Startup<br />Large Company<br /><ul><li>Business Model found
  • 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. Next,What’s A Founder?<br />
  • 42. What You and I Saw<br />
  • 43. What Michelangelo Saw<br />
  • 44. What You and I Saw<br />
  • 45. What Van Gogh Saw<br />
  • 46. Founders See Things Others Don’t<br />
  • 47. Founders See Things Others Don’t<br />Founders are Artists.<br />Actually They are Composers.<br />They Create Something From Nothing<br />
  • 48. Founders See Things Others Don’t<br />They Build a Company By Convincing Others To See What They Do<br />
  • 49. Founders See Things Others Don’t<br />The Early Employees Who Join Them <br />Are the Performers<br />
  • 50. I Have a Vision<br />
  • 51. I Know What Needs to Be Done<br />
  • 52. Lets Launch a New Product!<br />
  • 53. Five Ways Founders Fail<br />
  • 54. #1I Know Who The Customer Is<br />
  • 55. #2I Know Exactly the Product They Need<br />
  • 56. #3I Know the Problem They Have<br />
  • 57. #4We Can Fix It After We Ship It All<br />
  • 58. #5<br />All I Need to Do is Execute the Plan<br />
  • 59. Product Introduction Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  • 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. 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. 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. 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. Hire Sales VP
  • 65. Hire 1st Sales Staff</li></ul>Sales<br />
  • 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. Hire Sales VP
  • 68. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  • 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. Hire Sales VP
  • 71. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  • 72. Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
  • 73. Waterfall
  • 74. Q/A
  • 75. Tech Pubs</li></li></ul><li>No Business Plan survives first contact with customers<br />
  • 76. Startups Are Not Smaller Versions of Large Companies<br />
  • 77. Startups Are Not Smaller Versions of Large Companies<br />Large Companies Execute Known Business Models<br />
  • 78. Startups Are Not Smaller Versions of Large Companies<br />Startups Search for Unknown Business Models<br />
  • 79. So Search for a Business Model<br />
  • 80. The Business Model:<br />Any company can be described in 9 building blocks<br />
  • 81. CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
  • 82. VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
  • 83. CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
  • 84. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  • 85. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  • 86. KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
  • 87. KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />59<br />
  • 88. KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
  • 89. COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
  • 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. sketch out your business model<br />
  • 92. But,Realize They’re Hypotheses<br />
  • 93. 9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
  • 94. How Do Startups Search For A Business Model?<br /><ul><li> The Search isCustomer Development
  • 95. The Implementation isAgile Development
  • 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. Customer DevelopmentThe Search For the Business Model<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Pivot<br />
  • 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. Test Hypotheses:<br /><ul><li>Product
  • 100. Market Type
  • 101. Competition</li></ul>Turning Hypotheses to Facts<br />
  • 102. Test Hypotheses:<br /><ul><li>Problem
  • 103. Customer
  • 104. User
  • 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. Customer
  • 107. User
  • 108. Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
  • 109. Market Type
  • 110. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  • 111. (Customer)
  • 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. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  • 114. Customer
  • 115. User
  • 116. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  • 117. Market Type
  • 118. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  • 119. (Customer)
  • 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. Validate Business Model</li></li></ul><li>
  • 122. The Minimum Viable Product (MVP)<br /><ul><li> Smallest feature set that gets you the most …orders, learning, feedback, failure…
  • 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. 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. 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. The Pivot<br /><ul><li>The heart of Customer Development
  • 127. Iteration without crisis
  • 128. Fast, agile and opportunistic</li></li></ul><li>How Does This Really Work?Stanford Lean LaunchPad Class<br />
  • 129. How Does This Really Work?Stanford Lean LaunchPad Class<br />8 Weeks From an Idea to a Business<br />
  • 130. Pivot ExampleRobotic Weeding<br />Talked 75 Customers in 8 Weeks<br />
  • 131. Our initial plan<br />Confidential<br />
  • 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. White Farms, Large Peanut farmer in Georgia
  • 134. REFCO Farms, large grower in Salinas Valley
  • 135. Rincon Farms, large grower in Salinas Valley
  • 136. Small Organic Corn/Soy grower in Nebraska
  • 137. Heirloom Organics, small owner/operator, Santa Cruz Mts
  • 138. Two small organic farmers at farmers market
  • 139. Ag Services of Salinas, Fertilizer applicator</li></ul>Mowing<br />Interviewed:<br /><ul><li>Golf: Stanford Golf course
  • 140. Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6)
  • 141. Toro dealer (large mower manufacturer)
  • 142. User of back-yard mowing system
  • 143. Maintenance Services for City of Los Altos
  • 144. Colony Landscaping (Mowing service for stadiums)</li></ul>Confidential<br />
  • 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. 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. 1 Week – 1 CarrotBot<br />Confidential<br />
  • 148. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  • 149. Marketing
  • 150. Demo and customer feedback
  • 151. Farming conventions.
  • 152. Demo, demo, and demo!!
  • 153. Proximity is paramount
  • 154. Organic Farmers
  • 155. Weeding Service Providers
  • 156. Conventional Farmers
  • 157. Cost Reduction
  • 158. Remove labor force pains
  • 159. Eliminate bio-waste hazards
  • 160. Research Labs
  • 161. Equipment Manufacturers
  • 162. Distribution Network
  • 163. Service Providers
  • 164. IP – Patents
  • 165. Video Classifier Files
  • 166. Robust Technology
  • 167. Dealers
  • 168. Direct Service
  • 169. Indirect Service
  • 170. … then Dealers
  • 171. Asset Sale
  • 172. Direct Service with equipment rental
  • 173. … then Asset Sale</li></ul>Value-Driven<br />
  • 174. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  • 175. Marketing
  • 176. Demo and customer feedback
  • 177. Farming conventions.
  • 178. Demo, demo, and demo!!
  • 179. Proximity is paramount
  • 180. Mid/Large Organic Farmers
  • 181. Agricultural corporations
  • 182. Weeding Service Providers
  • 183. Mid/Large Conventional Farmers
  • 184. Cost Reduction
  • 185. Remove labor force pains
  • 186. Eliminate bio-waste hazards
  • 187. Research Labs
  • 188. Equipment Manufacturers
  • 189. Distribution Network
  • 190. Service Providers
  • 191. IP – Patents
  • 192. Video Classifier Files
  • 193. Robust Technology
  • 194. Direct Service
  • 195. Indirect Service
  • 196. … then Dealers
  • 197. Direct Service with equipment rental
  • 198. ($1,500/d; 120d/yr )
  • 199. Low density: $1,500/d
  • 200. High density: $6,000/d</li></ul>Value-Driven<br />
  • 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. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  • 203. Marketing
  • 204. Demo and customer feedback
  • 205. Farming conventions.
  • 206. Demo, demo, and demo!!
  • 207. Proximity is paramount
  • 208. Mid/Large Organic Farmers
  • 209. Agricultural corporations
  • 210. Weeding Service Providers
  • 211. Mid/Large Conventional Farmers
  • 212. Research Labs
  • 213. Equipment Manufacturer
  • 214. Distribution Network
  • 215. Service Providers
  • 216. 2 or 3 Key Farms
  • 217. Cost Reduction
  • 218. Remove labor force pains
  • 219. Eliminate bio-waste hazards
  • 220. IP – Patents
  • 221. Video Classifier Files
  • 222. Robust Technology
  • 223. Direct Service
  • 224. Indirect Service
  • 225. … then Dealers
  • 226. Direct Service with equipment rental
  • 227. Low density: $1,500/d
  • 228. High density: $6,000/d</li></ul>Value-Driven<br /><ul><li> R&D
  • 229. Bill of Materials
  • 230. Training & Service
  • 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. Personal Libraries<br />
  • 233. Insight: No more bookshelves<br />eBooks+150% YoY ‘10<br />Printed Books <br />-20% YoY ‘10<br />
  • 234. Version 1.0: Personal Libraries<br />
  • 235. Original Idea: Personal Digital Libraries<br />Import, organize and share thousands of digital papers<br />
  • 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. Here’s What We Did<br />Version 1.0: Personal Libraries<br />
  • 238. Got out of the building<br />
  • 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. Got out of the building<br /><ul><li>100+ Interviews
  • 241. Extensive Surveys</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 242. Extensive Surveys
  • 243. 33,000+ Adwords</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 244. Extensive Surveys
  • 245. 33,000+ Adwords
  • 246. Compete Review</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 247. Extensive Surveys
  • 248. 33,000+ Adwords
  • 249. Compete Review
  • 250. Market Sizing</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 251. Extensive Surveys
  • 252. 33,000+ Adwords
  • 253. Compete Review
  • 254. Market Sizing
  • 255. 50 bloggers</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 256. Extensive Surveys
  • 257. 33,000+ Adwords
  • 258. Compete Review
  • 259. Market Sizing
  • 260. 50 bloggers
  • 261. 6 Social Networks</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 262. Extensive Surveys
  • 263. 33,000+ Adwords
  • 264. Compete Review
  • 265. Market Sizing
  • 266. 50 bloggers
  • 267. 6 Social Networks
  • 268. Usability Tests</li></li></ul><li>Got out of the building<br /><ul><li>100+ Interviews
  • 269. Extensive Surveys
  • 270. 33,000+ Adwords
  • 271. Compete Review
  • 272. Market Sizing
  • 273. 50 bloggers
  • 274. 6 Social Networks
  • 275. Usability Tests
  • 276. Rapid Iteration</li></li></ul><li>Here’s What We Found<br />Version 1.0: Personal Libraries<br />
  • 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. 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. Pipelines Optimize
  • 280. The Web Listens</li></li></ul><li>Here's what we found: Version 1.0<br />GOOD<br /><ul><li>Subscriptions Rock
  • 281. Pipelines Optimize
  • 282. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap</li></ul>Teaching team saw pattern in our data<br />
  • 283. Run away from this customer as fast as possible. <br />
  • 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. 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. Pipelines Optimize
  • 287. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap
  • 288. Negative Margins</li></li></ul><li>Here's what we found: Version 1.0<br />GOOD<br /><ul><li>Subscriptions Rock
  • 289. Pipelines Optimize
  • 290. The Web Listens</li></ul>BAD<br /><ul><li>Academics = Cheap
  • 291. Negative Margins
  • 292. ECM = Boring</li></ul>No adjacent pivots worked for the team<br />
  • 293. Version 2.0: Trusted Advice<br />
  • 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. New Hypotheses<br />
  • 296. Here’s What We Did<br />Version 2.0: Trusted Advice<br />
  • 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. Extensive Surveys</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  • 299. Extensive Surveys
  • 300. Landing Page Tests</li></ul>Landing pages tested on affluent, career aged professionals, approximately 70/30 male/female, N=800+<br />
  • 301. Got out of the building, again<br /><ul><li>40+ Interviews
  • 302. Extensive Surveys
  • 303. Landing Page Tests
  • 304. Market Research</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  • 305. Extensive Surveys
  • 306. Landing Page Tests
  • 307. Market Research
  • 308. Compete Research</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  • 309. Extensive Surveys
  • 310. Landing Page Tests
  • 311. Market Research
  • 312. Compete Research
  • 313. Revenue Analysis</li></li></ul><li>Got out of the building, again<br /><ul><li>40+ Interviews
  • 314. Extensive Surveys
  • 315. Landing Page Tests
  • 316. Market Research
  • 317. Compete Research
  • 318. Revenue Analysis
  • 319. Two Prototypes</li></ul>Insidely.com<br />wantio.com<br />
  • 320. Got out of the building, again<br /><ul><li>40+ Interviews
  • 321. Extensive Surveys
  • 322. Landing Page Tests
  • 323. Market Research
  • 324. Compete Research
  • 325. Revenue Analysis
  • 326. Two Prototypes
  • 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. Minimum bachelors from expensive school</li></ul>Traits:<br /><ul><li>Ideas from blogs & shopping websites
  • 329. Values celebrity trends & friends’ opinions
  • 330. Wants high ticket items at lowest price
  • 331. Event-driven shopper—new release or sale</li></ul>Motivation<br /><ul><li>Craves new products
  • 332. Hates tedious work
  • 333. Identifies as influencer among friends
  • 334. Fears being cheated online</li></ul>Behavior<br /><ul><li>Spends 5 hour+ monthly hearing about products
  • 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. Version 2.0: Trusted Advice<br />Top ~6M US Influentials (~$9B/year)<br />
  • 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. Here’s What We Found<br />Version 2: Trusted Advice<br />
  • 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. 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. 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. Findings on "Trusted Advice"<br />Positive results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  • 343. High Conversion
  • 344. Needs Addressed </li></ul>See videos at http://factnote.com/c/e245<br />
  • 345. Findings on "Trusted Advice"<br />Positive results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  • 346. High Conversion
  • 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. Findings on "Trusted Advice"<br />Some negative results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  • 349. High Conversion
  • 350. Needs Addressed </li></ul>BAD<br /><ul><li>Missing Features</li></ul>See videos at http://factnote.com/c/e245<br />
  • 351. Findings on "Trusted Advice"<br />Some negative results on “Trusted Advice” Shopping Add-in testing<br />GOOD<br /><ul><li>Fast Interest
  • 352. High Conversion
  • 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. Findings on "Trusted Advice"<br />MBA Exchange spams us out of Google<br />GOOD<br /><ul><li>Fast Interest
  • 355. High Conversion
  • 356. Needs Addressed </li></ul>BAD<br /><ul><li>Missing Features
  • 357. SEO Battle</li></li></ul><li>Here’s Where We Ended Up <br />Version 2.1: Trusted Advice<br />
  • 358. The adventure continuesTrusted Advice 2.0<br />Protection against SEO-spammers<br />Next Experiments: <br /><ul><li>Trusted Lead Gen
  • 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. 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. Life is short, focus on big markets</li></li></ul><li>What We Learned<br /><ul><li>Potential for disruption abounds
  • 362. Life is short, focus on big markets
  • 363. All we need is to be relentless</li></li></ul><li>Blog Your Progress<br />
  • 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. We Made Students Blog Their Progress<br />It Changed Everything<br />
  • 366. Interview<br />
  • 367. Photos<br />Videos<br />
  • 368. Surveys<br />
  • 369. Interview<br />& Photos<br />
  • 370. Competitive Analysis<br />
  • 371. Key Findings<br />
  • 372. A/B Test Results<br />
  • 373. Key Question<br />
  • 374. Strategy<br />
  • 375. Business Model Canvas as the Scorecard<br />
  • 376.
  • 377. Business Canvas Change Progress <br />1<br />
  • 378. Business Canvas Change Progress <br />2<br />
  • 379. Business Canvas Change Progress <br />3<br />
  • 380. Business Canvas Change Progress <br />4<br />
  • 381. Business Canvas Change Progress <br />5<br />
  • 382. Business Canvas Change Progress <br />6<br />
  • 383. Business Canvas Change Progress <br />7<br />
  • 384. SidebarMarket Type<br />
  • 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. Three Markets Types<br />Market Type changes everything<br />Sales, marketing and business development differ radically by market type<br />
  • 387. Market Type Changes Everything<br />Customers<br /><ul><li> Needs
  • 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. 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. Carpe Diem<br />www.steveblank.com<br />
  • 391. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  • 392. Market Size<br />
  • 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. How Big is the Pie?Total Available Market<br />Total Available Market<br /><ul><li>How manypeople would want/needthe product?
  • 395. How large is the market be (in $’s) if they all bought?
  • 396. How many units would that be?</li></ul>How Do I Find Out?<br /><ul><li>Industry Analysts – Gartner, Forrester
  • 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. How many people have the money to buy the product
  • 399. How large would the market be (in $’s) if they all bought?
  • 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. How Much Can I Eat?Target Market<br /><ul><li>Who am I going to sell to in year 1, 2 & 3?
  • 402. How many customers is that?
  • 403. How largeis the market be (in $’s) if they all bought?
  • 404. How many units would that be?</li></ul>How Do I Find Out?<br /><ul><li>Talk to potential customers
  • 405. Identify and talk to channel partners
  • 406. Identify and talk to competitors</li></ul>TotalAvailableMarket<br />ServedAvailableMarket<br />Target Market<br />
  • 407. SegmentationIdentification of groups most likely to buy<br />TotalAvailableMarket<br /><ul><li>Geographic
  • 408. Demographic
  • 409. Psychographic variables
  • 410. Behavioral variables
  • 411. Channel
  • 412. etc…</li></ul>ServedAvailableMarket<br />Target Market<br />182<br />
  • 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. 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. Customers<br />
  • 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. Corporate Customers<br />Business to Business (B to B)<br />
  • 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. 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. 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. How Do They Interact to Buy?<br />Organization Chart<br />Influence Map<br />Sales Road Map<br />
  • 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. How Do They Hear About You?<br />Demand Creation<br />Network effect<br />Sales<br />
  • 424. Consumer Customers<br />Business to Consumer (B to C)<br />
  • 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. 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. 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. How Do They Decide to Buy?<br />Demand Creation<br />Viral?<br />SEO/SEM<br />Network effect?<br />AARRR (Dave McClure)<br />
  • 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. 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. Multi-Sided Markets<br />Business to Business to Consumer <br />(B to B to C)<br />
  • 432. Who’s The Customer?<br />Consumer End Users, Corporate Customers Pay<br />Multiple Consumers<br />Etc.<br />
  • 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. Customer Relationships<br />Get – Keep - Grow<br />
  • 435. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  • 436. “Get Customers” Funnel<br />$<br />Acquire<br />Activate<br />Getting Customers – Virtual Channel<br />
  • 437. Earned and <br />Paid Media<br />PR<br />“Get Customers” Funnel<br />Viral Mktg<br />SEO<br />$<br />SEM/PPC<br />Acquire<br />Activate<br />Blogs/Website<br />Affiliate Mktg<br />Advertising<br />Tradeshows<br />Getting Customers – Virtual Channel<br />
  • 438. “Get Customers” Funnel<br />Interest<br />$<br />Awareness<br />Consideration<br />Purchase <br />Getting Customers – Physical Channel<br />
  • 439. Getting Customers – Physical Channel<br />Earned and <br />Paid Media<br />“Get Customers” Funnel<br />PR<br />Product Reviews<br />$<br />Awareness<br />Tradeshows<br />Interest<br />Purchase <br />Consideration<br />Blogs/Website<br />Advertising<br />
  • 440. Earned and<br />Paid Media<br />Loyalty Programs<br />Get Customers<br />product updates <br />Awareness<br />Keep Customers<br />Consideration<br />Purchase <br />Interest<br />Customer check-in calls<br />Customer satisfaction survey<br />Keeping Customers<br />
  • 441. Earned and<br />Paid Media<br />Grow Customers<br />Get Customers<br />product updates <br />Loyalty Programs<br />$<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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