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Customer Development at Startup2Startup

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Steve Blank and Eric Ries at Startup2Startup Customer Development Presentation 30 April 2009, Palo Alto California

Steve Blank and Eric Ries at Startup2Startup Customer Development Presentation 30 April 2009, Palo Alto California

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  • 1. The Customer Development Model Steve Blank Stanford School of Engineering / UC Berkeley, Haas Business School www.steveblank.com Eric Ries The Lean Startup Startuplessonslearned.blogspot.com
  • 2. More startups Fail from a Lack of Customers than from a Failure of Product Development
  • 3. Conundrum
    • We have process to manage product development
    • We have no process to manage customer development
  • 4. An Inexpensive Fix
    • Focus on Customers and Markets from Day One
    • How?
  • 5. Build a Customer Development Process Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship Product Development Customer Development ? ? ? ?
  • 6. Customer Development and Product Development Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship Product Development Customer Development Company Building Customer Discovery Customer Validation Customer Creation
  • 7. Customer Development: Key Ideas
    • Parallel process to Product Development (agile)
    • Measurable Checkpoints
    • Not tied to FCS, but to customer milestones
    • Notion of Market Types to represent reality
    • Emphasis is on learning & discovery before execution
  • 8.
    • Stop selling, start listening
      • There are no facts inside your building, so get outside
    • Test your hypotheses
      • Two are fundamental: problem and product concept
    Customer Discovery: Step 1 Customer Discovery Customer Validation Company Building Customer Creation
  • 9. Customer Discovery: Exit Criteria
    • What are your customers top problems?
      • How much will they pay to solve them
    • Does your product concept solve them?
      • Do customers agree?
      • How much will they pay?
    • Draw a day-in-the-life of a customer (archetypes)
      • before & after your product
    • Draw the org chart of users & buyers
  • 10. Customer Validation: Step 2 Customer Discovery Customer Validation Customer Creation Company Building
    • Develop a repeatable and scalable sales process
    • Only earlyvangelists are crazy enough to buy
  • 11. Customer Validation: Exit Criteria
    • Do you have a proven sales roadmap?
      • Org chart? Influence map?
    • Do you understand the sales cycle?
      • ASP, LTV, ROI, etc.
    • Do you have a set of orders ($’s) validating the roadmap?
    • Does the financial model make sense?
  • 12. Sidebar Market Type
  • 13. New Product Conundrum
    • New Product Introductions sometimes work, yet sometimes fail
      • Why?
      • Is it the people that are different?
      • Is it the product that are different?
    • Perhaps there are different “types” of startups?
  • 14. Three Types of Markets
    • Who Cares?
    • Type of Market changes EVERYTHING
    • Sales, marketing and business development differ radically by market type
    • Details next week
    New Market Resegmented Market Existing Market
  • 15. Type of Market Changes Everything
    • Market
      • Market Size
      • Cost of Entry
      • Launch Type
      • Competitive Barriers
      • Positioning
    • Sales
      • Sales Model
      • Margins
      • Sales Cycle
      • Chasm Width
    • Finance
      • Ongoing Capital
      • Time to Profitability
    • Customers
      • Needs
      • Adoption
    New Market Resegmented Market Existing Market
  • 16. Definitions: Three Types of Markets
    • Existing Market
      • Faster/Better = High end
    • Resegmented Market
      • Niche = marketing/branding driven
      • Cheaper = low end
    • New Market
      • Cheaper/good enough can create a new class of product/customer
      • Innovative/never existed before
    New Market Resegmented Market Existing Market
  • 17. So What Does Engineering Do?
  • 18. Traditional Product Development Unit of progress: Advance to Next Stage Problem: known Solution: known Waterfall Requirements Design Implementation Verification Maintenance
  • 19. Agile Unit of progress: a line of working code Problem: Known Solution: Unknown “ Product Owner” or in-house customer
  • 20. Product Development at Lean Startup Unit of progress: validated learning about customers ($$$) Problem: Unknown Solution: Unknown
  • 21. Minimize TOTAL time through the loop IDEAS CODE DATA BUILD LEARN MEASURE
  • 22. So What Do I Do? Really
  • 23. First Steps
    • Fact-based culture, built to learn
    • Decide on business model
      • What are the "fundamental drivers of growth”
    • Create a decision loop (build-measure-learn)
    • Write your hypotheses down (3 diagrams)
      • Business model, distribution channel, demand creation
    • Prove it in micro-scale
  • 24. Execution
    • Relentless execution
    • Team needs to be true believers not employees
    • Focus on the few things that matter
    • Don ’t confuse your hypothesis with facts
    • Continuous customer contact
    • Only you can put your company out of business
  • 25. General Principles
    • If you think entrepreneurship is about the money become a VC
    • If everyone else thinks it ’s a bad idea that may be a good sign
    • The better your reality distortion field the more you need to get outside the building
    • Ethics and values are about what you practice when the going gets tough
  • 26. Further Reading Course Text at : www.cafepress.com/kandsranch Blogs www.steveblank.com http://startuplessonslearned.blogspot.com/
  • 27. There’s much more… IDEAS CODE DATA BUILD LEARN MEASURE Code Faster Unit Tests Usability Tests Continuous Integration Incremental Deployment Free & Open-Source Components Cloud Computing Cluster Immune System Just-in-time Scalability Refactoring Developer Sandbox Measure Faster Split Tests Clear Product Owner Continuous Deployment Usability Tests Real-time Monitoring Customer Liaison Learn Faster Split Tests Customer Interviews Customer Development Five Whys Root Cause Analysis Customer Advisory Board Falsifiable Hypotheses Product Owner Accountability Customer Archetypes Cross-functional Teams Semi-autonomous Teams Smoke Tests Funnel Analysis Cohort Analysis Net Promoter Score Search Engine Marketing Real-Time Alerting Predictive Monitoring
  • 28. Thanks !
    • Startup Lessons Learned Blog
      • http://startuplessonslearned.blogspot.com/
    • Webcast: “How to Build a Lean Startup, step-by-step”
      • May 1, 2009 at 10am PST
      • http://www.oreillynet.com/pub/e/1294
    • The Lean Startup Workshop
      • An all-day event for a select audience
      • May 29, 2009 in San Francisco
      • Sign up at: http://bit.ly/a5uw8