This document discusses customer development and business models for startups. It defines different types of startups, including small businesses, social startups, sustaining/disruptive innovation within large companies, and scalable startups. The key aspects of a business model are defined using the business model canvas framework. Customer development is presented as the process startups use to search for an unknown business model, involving customer discovery, validation, and pivoting if needed based on feedback. The minimum viable product and agile development are discussed as ways to test hypotheses. An example pivot from a robotic weeding startup is provided.
2. Welcome to Customer Development Steve Blank Stanford - School of Engineering U.C. Berkeley - Haas School Of Business www.steveblank.com Twitter: sgblank
37. Buyable Startup Search Sell Scalable Startup $5 to 50M Acquisition Goal is to solve for: Internet and Mobile Apps
38. Buyable Startup Search Sell Scalable Startup $5 to 50M Acquisition Goal is to solve for: Internet and Mobile Apps Sell to larger company
39.
40. i.e. Product/Market fit- Repeatable sales model - Managers hired What’s A Startup? Search Execute A Startup is a temporary organization used to search for a repeatable and scalable business model
97. Customer DevelopmentThe Search For the Business Model Company Building CustomerDiscovery CustomerValidation Customer Creation Pivot
98. Customer Discovery CustomerDiscovery CustomerValidation Company Building CustomerCreation Stop selling, start listening Test your hypotheses Continuous Discovery Done by founders
124. Testing the MVP (Web Example) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Interview customers to make sure they have a matching core problem Set up web site landing page to test for conversion See what offers are required to get customers to use the product (e.g. prizes, payment) 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 Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through
125. Testing the MVP (Non-Web) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Interview customers to make sure they have a matching core problem Set up web site landing page to test for conversion Set up a Lighthouse Customer Program where potential customers pay to get early access to product prototypes
145. Business Plan Autonomous Vehicles for Mowing & Weeding Dealers sell, installs and supports customer Co. trains dealers, supports dealers - Innovation - Customer Education - Dealer training Mowing - Owners of public or commercially used green spaces (e.g. golf courses) - Landscaping service provider Weeding - Farmers with manual weeding operations We reduce operating cost - Labor reduction - Better utilization of assets (eg mow or weed at nights) - Improved performance (less rework, food safety) - Dealers (Mowing and Ag) - Vehicle OEMs (John Deere, Toro, Jacobsen, etc) - Research labs - Mowing Dealers - Ag Dealers Engineers on Autonomous vehicles, GPS, path-planning Dealer discount COGS seek a 50-60% Gross Margin Heavy R&D investment Asset sale Our revenue stream derives from selling the equipment
146. Autonomous vehiclesWEEDING Dealers sell, installs and supports customer Co. trains dealers, supports dealers - Innovation - Customer Education - Dealer training - Low density vegetable growers - High density vegetable growers - Thinning operations - Conventional vegetables We reduce operating cost - Labor reduction (100 to 1) - Reduced risk of contamination - Mitigate labor availability concerns - Ag Dealers - Ag Service providers - Research labs - Ag Dealers - Ag Service providers Engineers on Machine Vision Two problems: - Identification - Elimination Dealer discount COGS seek a 50-60% Gross Margin Heavy R&D investment Asset sale Our revenue stream derives from selling the equipment
201. World Ag Expo interviews:the need is real and wide spread 10+ interviews at show Everyone confirmed the need Robocrop, UK based, crude competitor sells for $171 K Revenue Stream Mid to small growers prefer a service Large growers prefer to buy, but OK with service until technology is proven Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability) Confidential
235. Original Idea: Personal Digital Libraries Import, organize and share thousands of digital papers
236. something-something-something.com Original idea Invincible Business Model: Version 1.0 SHORT TERMResearchers Lawyers Scientists LONG TERMAvid book readers Professionals FB/TW posts from users you know Company blog, FB, TW, support forums Import, organize and share thousands of papers Targeted marketing Product development Constant iteration & testing Libraries, Universities, Research Centers Bloggers and media targeting customer segment Academic Database providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
294. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
337. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base Affiliate program fees Licensing Subscription fees Ad revenue AWS Infrastructure SEM Eng & Marketing OpEx
347. Needs Addressed Super easy to install and use. I really did enjoy it! Great idea! I will keep the extension installed because I do think this is practical! I could see myself using this regularly
364. How? Customer Development The Process Narrative Interviews Surveys Videos Prototypes Business Model Canvas Scorekeeping Real-time Feedback Physical Reality Checks Skype Face-to-face
385. Product Introduction Conundrum Product introductions aren’t predictable Why? Is it the people that are different? Is it the product that are different? Are there different “types” of startups?
386. Three Markets Types Market Type changes everything Sales, marketing and business development differ radically by market type
393. Market/Opportunity Analysis How Big is It?: Market/Opportunity Analysis Identify a Customer and Market Need Size the Market Competitors Growth Potential
394.
395. How large is the market be (in $’s) if they all bought?
413. Market Size: Summary Market Size Questions: How big can this market be? How much of it can we get? Market growth rate Market structure (Mature or in flux?) Most important: Talk to Customers and Sales Channel Next important: Market size by competitive approximation Wall Street analyst reports are great And : Market research firms Like Forester, Gartner
414. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done? images by JAM
416. Corporate? Consumer? Business to Business (B to B) Use or buy inside a company Business to Consumer (B to C) Use or buy for themselves Business to Business to Consumer (B to B to C) Sell a business to get to a consumer Other Multi-sided Markets with multiple customers
418. What do they want you to do? Increase revenue? Decrease costs? Get them new customers? Keep up with or pass competitors? How important is it?
419. Market Type & Ignoring Customers Existing Market? Resegmenting an Existing Market? niche or low cost New Market? When do I ignore customer feedback?
420. Who’s the Customer in a Company? User? Influencer? Recommender? Decision Maker? Economic Buyer? Saboteur? Archetypes for each?
421. How Do They Interact to Buy? Organization Chart Influence Map Sales Road Map
422. Pass/Fail Signals & Experiments How do you test interest? Where do you test interest? What kind of experiments can you run? How many do you test?
423. How Do They Hear About You? Demand Creation Network effect Sales
425. What do they want you to do? Does it entertain them? Does it connect them with others? Does it make their lives easier? Does it satisfy a basic need? How important is it? Can they afford it?
426. Market Type & Ignoring Customers Existing Market? Resegmenting an Existing Market? niche or low cost New Market? When do I ignore customer feedback?
427. Consumer Customers Do they buy it by themselves? Do they need approval of others? Do they use it alone or with others?
428. How Do They Decide to Buy? Demand Creation Viral? SEO/SEM Network effect? AARRR (Dave McClure)
429. Pass/Fail Signals & Experiments How do you test interest? Where do you test interest? What kind of experiments can you run? How many do you test?
430. The Consumer Sales Channel A product that’s bits can use the web But getting a physical consumer product into retail distribution is hard Is Wal-Mart a customer? More next week
432. Who’s The Customer? Consumer End Users, Corporate Customers Pay Multiple Consumers Etc.
433. Multiple Customer Segments Each has its own Value Proposition Each has its own Revenue Stream One segment cannot exist without the other Which one do you start with?