- Product managers at startups need to wear sneakers because they must actively search for customers outside the building, unlike at large companies where customers are known. - Startups go through phases of customer discovery, validation, and creation where hypotheses about customers and products are tested iteratively through contact with potential users. - There are three types of markets that determine how startups should approach sales, marketing, and business development - existing, resegmented, and new markets. - Engineering approaches also differ between startups searching for problems/solutions and large companies executing known requirements. Founders must lead the search while product management can help or hinder it.

1. Why Product Managers Need SneakersSteve Blankwww.steveblank.comTwitter: sgblank

2. I Drew ThisCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivot

3. I Called It:Customer DevelopmentCustomerDiscoveryCompany BuildingCustomerValidationCustomer CreationPivot

4. I Wrote This

5. A Few People Read It

6. I Write a Blog www.steveblank.com

7. Five Short Stories

8. Not All Startups Are Equal

9. Small BusinessStartupSmall Business StartupsServe known customer with known product

10. Feed the familySmall BusinessStartupExit Criteria Business Model found- Profitable business Existing team< $1M in revenueSmall Business Startupsknown customer known product

11. Feed the familySmall BusinessStartup- Business Model found- Profitable business Existing team< $10M in revenueSmall Business Startups5.7 million small businesses in the U.S. <500 employees

12. 99.7% of all companies

13. ~ 50% of total U.S. workershttp://www.sba.gov/advo/stats/sbfaq.pdf

14. Large Company Sustaining InnovationSustaining InnovationTransitionScalableStartupLarge CompanyExisting Market / Known customer

15. Known product feature needsLarge Company Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive Innovation New Market / Unknown customer needs

16. New tech / Unknown product features

17. Looks like a scalable startupScalableStartupLarge Company>$100M/yearScalable StartupGoal is to solve for: unknown customer and unknown features

18. ScalableStartupLarge Company>$100M/yearExit Criteria Business model found

19. Total Available Market > $500m -$1B

20. Can grow to $100m/year

21. Focused on execution and processScalable Startup

22. ScalableStartupLarge Company>$100M/yearTotal Available Market > $500m

23. Can grow to $100m/year

24. Business model found

25. Focused on execution and process

26. Typically requires “risk capital”Scalable Startup In contrast a scalable startup is designed to grow big

27. Typically needs risk capital

28. What Silicon Valley means when they say “Startup”ScalableStartupLarge CompanySearch customer needs/product features found i.e. Product/Market fit Business Model found- Repeatable sales model- Managers hiredWhat’s A Startup?A Startup is the organization used to search for a scalable business model

29. What VC’s Don’t Tell You:The Transition – Founders LeaveScalableStartupTransitionLarge CompanyBuildFounders depart

30. Professional Mgmt

31. Process

32. Beginning of scaleDoesn’t Need SneakersScalableStartupTransitionLarge CompanyBuildGrowProduct Management

33. Needs Several Pairs of SneakersScalableStartupTransitionLarge CompanySearchIs very different hereProduct Management here

34. Why Product Managers Wear Sneakers

35. Startups Search and PivotThe Search for the Business ModelScalableStartupTransitionLarge CompanyBusiness Model found customer needs/product features found i.e. Product/Market fitFound by founders, not employees

36. Repeatable sales model- Managers hired

37. Startups Search, Companies ExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found

38. Product/Market fit- Repeatable sales model- Managers hired

39. Metrics Versus AccountingThe Execution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet

40. Cash Flow Statement

41. Income StatementMetrics Versus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost

42. Viral coefficient

43. Customer Lifetime Value

44. Average Selling Price/Order Size

45. Monthly burn rate

46. etc. Traditional Accounting Balance Sheet

47. Cash Flow Statement

48. Income StatementCustomer Validation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization

49. Scalable

50. Price List/Data Sheets

51. Revenue PlanCustomer Validation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters

52. Pricing/Feature unstable

53. Not yet repeatable

54. “One-off’s”

55. Done by foundersSales Sales Organization

56. Scalable

57. Price List/Data Sheets

58. Revenue PlanCustomer Development VersusProduct ManagementThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s

59. Feature Spec’s

60. Competitive Analysis

61. Prod Mgmt drivenCustomer Development Versus Product ManagementThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyProduct Management Delivers MRD’s

62. Feature Spec’s

63. Competitive AnalysisCustomer Development Hypothesis Testing

64. Minimum Feature Set

65. Pivots

66. Founder-drivenEngineering Versus Agile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.

67. Waterfall Development

68. QA

69. Tech PubsEngineering Versus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.

70. Waterfall Development

71. QA

72. Tech PubsAgile Development Continuous Deployment

73. Continuous Learning

74. Self Organizing Teams

75. Minimum Feature Set

76. PivotsStartups Model, Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge Company Plan describes “knowns”

77. Known features for line extensions

78. Known customers/markets

79. Known business modelStartups Model, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyUnknown customer needs

80. Unknown feature set

81. Unknown business model

82. Model found by iteration

83. Plan describes “knowns”

84. Known features for line extensions

85. Known customers/markets

86. Known business modelStartups Protect Mavericks, Companies Fire MavericksThe Execution of the Business ModelScalableStartupTransitionLarge CompanyPains in the butt

87. Always looking at something different

88. Doesn’t get with the programStartups Protect Mavericks, Companies Fire MavericksThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge Company CEO of your company

89. Finds your next market

90. Pains in the butt

91. Always looking at something different

92. Doesn’t get with the programStartups Don’t Last ForeverScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people Business Model found

93. Product/Market fit- Repeatable sales model- Managers hiredYou failif you remain a startup!

94. Plan versus Model

95. Business PlanA document your investors make you write that they don’t readA useful place for you to collect your guesses about your businessSize of Opportunity

96. Customers

97. Channel

98. Demand Creation

99. Revenue/Expenses/ProfitThe template to look like everyone else when you present to VC’s/Management

100. No Business Plan survives first contact with customers

101. So Search for a Business Model

102. What Is a Business Model?Diagram of flows between company and customersScorecard of hypotheses testingRapid change with each iteration and pivotProduct Management-driven* Alex Osterwalder

103. Business Model = Keeping Score in a StartupCUSTOMERRELATIONSHIPPARTNERNETWORKINFRASTRUCTURECUSTOMEROFFERTARGETCUSTOMERCORECAPABILITIESportrays the network of cooperative agreements with other companiesexplains the relationships a company establishes with its customersVALUEPROPOSITIONdescribes the customers a company wants to offer value tooutlines the capabilities required to run a company's business modelgives an overall view of a company's bundle of products and servicesDISTRIBUTIONCHANNELVALUECONFIGURATIONdescribes the channels to communicate and get in touch with customersdescribes the arrangement of activities and resourcessums up the monetary consequences to run a business modeldescribes the revenue streams through which money is earnedCOSTSTRUCTUREREVENUESTREAMSFINANCE

104. Business Model Generation Book

105. How Do Startups Search For A Business Model? The Search is called Customer Development

106. The Implementation is called Agile DevelopmentThe Lean Startup

107. Who Does This Search?The FoundersNot EmployeesHow?

108. Customer Development

109. Solving For Customer and Product Unknowns:Customer Development

110. Customer DevelopmentThe foundersGet the Hell Out of the Building^

111. More startups fail from a lack of customers than from a failure of product development

112. Then why do we have:process to manage product development?

113. Then why do we have:Process to manage product development?None to manage customer development?

114. Startup - Back of the Napkin ModelConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship

115. Tradition – Hire MarketingConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing

116. Tradition – Hire SalesConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization

117. Hire Sales VP

118. Hire 1st Sales StaffSales

119. Tradition – Hire Bus DevelopmentConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution

120. Hire Sales VP

121. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev

122. Do deals for FCSTradition – Hire Engineering/Product MgmtConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution

123. Hire Sales VP

124. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev

125. Do deals for FCSEngineering/Product Mgmt Write MRD

126. Waterfall

127. Q/A

128. Tech PubsProduct DevelopmentConcept/Bus. PlanProduct Dev.Alpha/Beta TestLaunch/1st Ship+CustomerDevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer Development

129. Customer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationStop selling, start listeningTest your hypothesesContinuous DiscoveryDone by founders

130. Customer DiscoveryPhase 3TestProductHypothesisPhase 4Verify, Iterate & ExpandCustomerDiscoveryTo ValidationPhase 1AuthorHypothesisPhase 2TestProblemHypothesis

131. Customer DiscoveryHypothesesCustomer& ProblemHypothesisDistribution & PricingHypothesisDemand CreationHypothesis Market TypeHypothesisProduct HypothesisCompetitiveHypothesisTest “Problem” Hypothesis “Problem”PresentationCustomerUnderstandingMarketKnowledge FriendlyFirst ContactsTest “Product” Hypothesis “Product”PresentationYet MoreCustomerVisitsSecondReality CheckFirst RealityCheckVerifyVerify theBusiness ModelIterate orExit Verify theProblemVerify the Product

132. Customer Development in the High-Tech Enterprise Fall 2009Customer DiscoveryCustomer& ProblemHypothesisDistribution & PricingHypothesisDemand CreationHypothesis Market TypeHypothesisProduct HypothesisCompetitiveHypothesis “Problem”PresentationCustomerUnderstandingMarketKnowledge FriendlyFirst Contacts “Product”PresentationYet MoreCustomerVisitsSecondReality CheckFirst RealityCheck Verify theProblemVerify theBusiness ModelIterate orExitVerify the ProductInside the BuildingHypothesesTest “Problem” HypothesisOutside the BuildingTest “Product” HypothesisVerify

133. HypothesisProductCustomer/ProblemDistribution/PricingDemand CreationMarket TypeCompetitionCustomer& ProblemHypothesisDistribution & PricingHypothesisDemand CreationHypothesis Market TypeHypothesisProduct HypothesisCompetitiveHypothesis

134. Customer ValidationCustomerDiscoveryCustomerValidationCustomer CreationCompanyBuildingPivotRepeatable and scalable business model?

135. PassionateEarlyvangelists?

136. Pivot back to Discovery if no customersCustomer ValidationPhase 4Business ModelVerifiedPhase 3PositioningCustomerValidationFrom DiscoveryTo CreationPhase 1Get Readyto SellPhase 2Sell toEarlyVangelists

137. Customer ValidationGet Ready to SellPrelim Sales& Collateral MaterialsPrelim Distribution Channel PlanArticulate a Value PropositionPrelim SalesRoadmap Hire a “Sales Closer”Align YourExecutivesSell to “EarlyVangelists”FormalizeAdvisory BoardRefine ChannelRoadmap ContactVisionaryCustomersSell to ChannelPartners Sell to EarlyCustomersRefine SalesRoadmapDevelop PositioningPresent toAnalysts &Influencers CompanyPositioningProductPositioningVerify Verify theSalesRoadmapVerify theChannelRoadmapIterate or ExitVerify theBusiness ModelVerify the Product

138. The Pivot The heart of Customer Development

139. Iteration without crisis

140. Fast, agile and opportunisticSpeeding Up Cycle TimeSpeed of cycle minimizes cash needs

141. Minimum feature set speeds up cycle time

142. Near instantaneous customer feedback drives feature setSidebarThere Are Three Types Of Startups The Role of Market Type

143. New Product ConundrumProduct introductions aren’t predictableWhy?Is it the people that are different?Is it the product that are different?Are there different “types” of startups?

144. Three Markets TypesMarket Type changes everythingSales, marketing and business development differ radically by market type

145. Three Types of MarketsExisting MarketFaster/Better = High endResegmented MarketNiche = marketing/branding drivenCheaper = low endNew MarketCheaper/good enough = creates a new class of product/customerInnovative/never existed before

146. Market Type Changes EverythingCustomers Needs

147. AdoptionMarketMarket SizeCost of EntryLaunch TypeCompetitive BarriersPositioningSalesSales ModelMarginsSales CycleChasm WidthFinance Ongoing Capital

148. Time to ProfitabilitySo What Does Engineering Do?

149. Waterfall / Product ManagementExecution on Two “Knowns”RequirementsProduct Features: knownDesignImplementationVerificationCustomer Problem: knownMaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com

150. Agile - Customer Problem is KnownExisting Company/Market“Product Owner” or in-house customer Unit of progress: a line of working codeProblem: KnownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com

151. Lean StartupCustomer Problem + Product Features are UnknownProblem: UnknownSolution: UnknownSource: Eric Rieshttp://startuplessonslearned.blogspot.com

152. 78Customer CreationCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationCreation comes after proof of sales

153. $’s for scale

154. Lean Startups are not cheap startupsCompany BuildingCompanyBuildingCustomer CreationCustomerValidationCustomerDiscovery(Re)build company’s organization & management

155. Re look at your missionSummaryFounders can’t delegate customer discoveryStartups are about speed of pivotsProductCustomerChannelThey are not about MRD’s and process Product management can be an asset or an albatross in startupsYou can make the difference…with sneakers

156. Thankswww.steveblank.com