• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Customer Development: The Second Decade by Bob Dorf
 

Customer Development: The Second Decade by Bob Dorf

on

  • 4,282 views

 

Statistics

Views

Total Views
4,282
Views on SlideShare
4,264
Embed Views
18

Actions

Likes
9
Downloads
149
Comments
0

3 Embeds 18

http://www.linkedin.com 15
https://www.linkedin.com 2
http://new2me.posterous.com 1

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel

Customer Development: The Second Decade by Bob Dorf Customer Development: The Second Decade by Bob Dorf Presentation Transcript

  • Customer Development: The Second Decade(aka Why Accountants Don’t Run Startups)
    Bob Dorf
    serial entrepreneur, startup advisor, partner, “supporting author”
    www.steveblank.com
    ©2010 K+S Ranch Consulting Inc.
  • …Is there a roadmap?
  • Scalable
    Startup
    Transition
    Large Company
    • Business Model found
    • i.e. Product/Market fit
    - Repeatable sales model
    - Managers hired
    What’s A Startup?
    A Startup is the temporary organization
    used to search for a scalable business model
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    4
  • Scalable
    Startup
    Large Company
    >$100M/year
    • Total Available Market > $500m
    • Company can grow to $100m/year
    • Business model found
    • Focused on execution and process
    • Typically requires “risk capital”
    ScalableStartup
    • Designed to grow big
    • Typically needs risk capital
    • How this room defines “Startup”
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    5
  • Venture Firms Invest in Scalable Startups
    Small Business
    Startup
    Scalable
    Startup
    Large Company
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    6
  • What VC’s Don’t Tell You:The Transition – Founders Leave
    Scalable
    Startup
    Transition
    Large Company
    • Founders depart
    • Professional Mgmt
    • Process
    • Beginning of scale
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    7
  • not quite the beginning of startups, but…100 Years Ago in Detroit
  • Inventorof the Modern Corporation
    Scalable
    Startup
    Transition
    Large Company
    Alfred P. Sloan
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    9
  • Alfred P. Sloan
    Scalable
    Startup
    Transition
    Large Company
    General Motors, President/Chairman
    • Cost Accounting
    • MIT’s Sloan School
    • Sloan Kettering
    • Kettering Institute
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    10
  • Founder of General Motors
    Scalable
    Startup
    Transition
    Large Company
    Billy Durant
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    11
  • Billy Durant
    Scalable
    Startup
    Transition
    Large Company
    • Leader in horse-drawn buggys
    • Fired by board, starts Chevrolet
    • Regains control of GM
    • Fired again, GM ~$3.6 billion*
    * GM Net sales in 1921 $304.5M = $3.6 Billion today
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    12
  • Durant vs Sloan
    Scalable
    Startup
    Transition
    Large Company
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    13
  • Durant vs. Sloan
    • Dies, rich, honored and famous
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    14
  • Durantvs. Sloan
    • Dies, rich, honored and famous
    • Dies penniless…
    …managing a bowling alley
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    15
  • Durant vs. Sloan
    Accountant
    • Dies managing a bowling alley
    • Dies, rich, honored and famous
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    16
  • You are here
    Scalable
    Startup
    Transition
    Large Company
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    17
  • 50 Years Ago in Detroit…
  • GM Owns the U.S. Car Market
    Scalable
    Startup
    Transition
    Large Company
    Roger B. Smith
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    19
  • Roger B. Smith
    Scalable
    Startup
    Transition
    Large Company
    General Motors, President/Chairman
    • GM >50% market share
    • Knew what the customer wanted
    • 5 years to bring a car to market
    • Huge inventories eliminate stoppages
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    20
  • Founderof Toyota and Lean Production
    Scalable
    Startup
    Transition
    Large Company
    Kiichiro Toyoda
    TaiichiOhno
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    21
  • Toyoda and Ohno
    Scalable
    Startup
    Transition
    Large Company
    • Taught by Americans post WWII
    • Couldn’t afford inventory like US auto companies
    • Toured GM plants and…
    • Built Kaizen/lean manufacturing
    • Toyota Lean Production System
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    22
  • 1960: Agile, Lean, Customer Centric
    Scalable
    Startup
    Transition
    Large Company
    • Short runs vs. Long option lists
    • Agile Product Development
    • Lean Manufacturing
    • Continuous Improvement
    • Customer Development
    … talk about ”a day in the life”
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    23
  • Toyoda/Ohnovs. Smith
    • Integrate Customer Development vs. Options
    • Agile Development plus Lean Manufacturing
    • U.S. Market share goes from 0 to 20%
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    24
  • Toyoda/Ohnovs. Smith
    • Buys $35 billion of Japanese robots to “fix” GM
    • Market share drops 50% to <25%
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    25
  • Toyoda/Ohno vs. Smith
    Accountant
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    26
  • Toyoda/Ohnovs. Smith
    You are here
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    27
  • 10 Years Ago in Silicon Valley…
  • More startups fail from a lack of customers than from a failure of product development
  • Yet All We Had WasThis…
    Concept/Seed Round
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    New Product Introduction Model
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    30
  • Traditional Product Introduction:Two Implicit Assumptions
    Customer Problem: known
    Concept
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    Product Features: known
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    31
  • This Was A Plan For Failure
    Long-term “lockdown” of Product Development/Engineering
    Assumed we understood customer problem/product solution
    But they are hypotheses
    the facts were outside the building
    Sales & Marketing focused on execution to First Customer Ship
    Costs and burn rate became front loaded
    Execution & hiring predicated on business plan hypothesis
    Financial projections assume success
    Heavy spending hit if product launch is wrong
    Failure always a bad reflection on Management, Board, Investors
    You don’t know if you’re wrong until you’re
    out of business, out of money, or (usually) both!
    32
  • 8 Startups later,Steve Blank Drew This…
    CustomerDiscovery
    Company
    Building
    CustomerValidation
    Customer Creation
    “Do-Over”
    33
  • Customer Development
    Company
    Building
    CustomerDiscovery
    CustomerValidation
    Customer Creation
    Which Turned Into A Model
    Product Introduction Model
    Concept
    Product Dev.
    Alpha/Beta Test
    Launch/
    1st Ship
    became
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    34
  • Customer Development:“one (great) entrepreneur’s theory,” 2001-2003
    CustomerDiscovery
    Company
    Building
    CustomerValidation
    Customer Creation
    Pivot
    35
  • Customer Development: happy 10th birthday…extensive “real world” deployment…morphed, tested, debated: CE0s, CM0s, VCs, MBAs…and a “slight” investment cycle change since ‘01-3!
    CustomerDiscovery
    Company
    Building
    CustomerValidation
    Customer Creation
    Pivot
    …a very short Customer Development overview
    36
  • Customer Discovery
    CustomerDiscovery
    CustomerValidation
    Company
    Building
    CustomerCreation
    Stop selling, start listening
    Test your hypotheses
    Continuous Discovery and Feedback
    Done by founders…OUTSIDE the building!
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    37
  • Customer Validation
    CustomerDiscovery
    CustomerValidation
    Customer Creation
    Company
    Building
    Do-Over
    • Repeatable and scalable business model?
    • Passionate Earlyvangelists?
    • Return to Discovery absent passionate customers
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    38
  • The “Do It Again” Loop
    • Iteration was at the heart of Customer Development
    • Fast, agile and opportunistic
    • (Almost) celebrate failure…whenever it’s instructive
    • But it didn’t have a name “Do over” is just so juvenile
    39
  • Customer Creation
    CustomerDiscovery
    CustomerValidation
    Company
    Building
    CustomerCreation
    • Creation comes after proof of sales
    • Spend to scale based on FACTS, not Hypotheses
    • Begins only with repeatable, scalable processesfor sales, marketing, demand creation
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    40
  • Company Building
    Company
    Building
    Customer Creation
    CustomerValidation
    CustomerDiscovery
    • (Re)build company, management, infrastructure
    • (Re)visit the mission
    • Go Global
    • Get a Porsche (or a Towncar)rganization& management
    • Re look at your mission
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    41
  • So what’s new since 2003??
    Customer Development startups have surged
    Customer Development “Rules” emerged
    Key Customer Development approaches have converged
    Product Development cycle times submerged
    …and easy money has been purged
    42
  • 5 Years Ago…
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    43
  • Eric Ries Extends the Model
    Took Steve’s class at U.C. Berkeley
    Co-founded IMVU
    Ditched Waterfall and paired Customer Development with an Agile Development Model
    Used off-the-shelf commodity software stack
  • Eric Ries: Insight1Engineering acts as if features are “known”
    Concept/Seed
    Product Dev.
    Alpha/
    Beta
    Launch/Ship
    Waterfall
    Requirements
    Solution: known
    Design
    Implementation
    Verification
    Problem: known
    Maintenance
    • Eric observedthe solution
    was unknown in a startup
    • Waterfall process could only build known features
  • Eric Ries: Insight #2Match Agile Dev to Customer Dev speed
    Concept/Seed
    Product Dev.
    Alpha/
    Beta
    Launch/Ship
    Solution: unknown
    • Agile was the development
    methodology to use when the
    product solution was unknown
  • Problem: Unknown
    Solution: Unknown
    Source: Eric Ries
    New #1: Eric Ries: Insight 3Customer + Agile + Commodity = Lean
    • Solving customer + feature unknowns is the “Lean Startup”
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    47
  • Orient
    Decide
    Act
    Observe
    ImplicitGuidance& Control
    ImplicitGuidance& Control
    UnfoldingCircumstances
    CulturalTraditions
    Observations
    GeneticHeritage
    Decision(Hypothesis)
    Analyses &Synthesis
    Action(Test)
    FeedForward
    FeedForward
    FeedForward
    NewInformation
    PreviousExperience
    OutsideInformation
    UnfoldingInteractionWithEnvironment
    UnfoldingInteractionWithEnvironment
    Feedback
    Feedback
    Orientation shapes observation, shapes decision, shapes action, and in turn is shaped by the feedback and other phenomena coming into our observing window.
    New #2: Reduced Cycle TimesJohn Boyd Insight: The OODA “Loop”
  • Speed Up Cycle Time
    • Speed of cycle minimizes cash needs
    • Minimum feature set speeds up cycle time
    • Near instantaneous feedback drives feature set
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    49
  • New #3: Jon Feiber@MDVNot all Startups Need Customer Development
    Market Risk vs. Technical Risk?
    Web is about customers & markets
    Biotech is about science & invention
  • SEO
    Campaigns, Contests
    SEM
    PR
    Biz Dev
    Social Networks
    Affiliates
    Blogs
    ACQUISITION
    Apps & Widgets
    Direct, Tel, TV
    REFERRAL
    Email
    Viral Loops
    Domains
    Retention
    Emails & widgets
    Emails & Alerts
    Website.com
    Affiliates, Contests
    Blogs, RSS, News Feeds
    System Events & Time-based Features
    Biz Dev
    Revenue $$$
    Ads, Lead Gen, Subscriptions, ECommerce
    New #4: Dave McClureDifferent Metricsfor (Web) Startups
    From Dave McClure
    http://500hats.typepad.com/
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    51
  • More Helpful Startup Metrics
    The Search for the Business Model
    The Execution of the Business Model
    Scalable
    Startup
    Transition
    Large
    Company
    Startup Metrics
    • Customer Acquisition Cost
    • Viral/Unique/Session Growth
    • Customer LTV change
    • Average Selling Price/Order Size
    • Monthly burn rate
    Traditional Accounting
    • Balance Sheet
    • Cash Flow Statement
    • Income Statement
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    52
  • New #5: Business Model, Not PlanFront-end to Customer Development
    Business Plans are Rigid, Static
    “No Business Plan Survives First Contact with Customers” who don’t read them --Steve Blank
    The Four Steps had:
    Business model flow for Enterprise Software
    Business model summary for each step
    Checklist for Enterprise Software
    It said, “modify it to fit your business”
    Now we can
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    53
  • Osterwalder’s Business Model - Insight
    value proposition
    customer relationships
    key activities
    customer segments
    key partners
    cost structure
    revenue streams
    key resources
    channels
    images by JAM
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    54
  • KEY
    PARTNERS
    OFFER
    CUSTOMER RELATIONSHIPS
    CUSTOMER
    SEGMENTS
    KEY
    ACTIVITIES
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    building
    block
    CHANNELS
    KEY
    RESOURCES
    REVENUE STREAMS
    COST STRUCTURE
    Business Model Canvas – Any Business
    55
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    55
  • …and The Pivot Gets A Name
    • Fueled by Customer Feedback
    • Head by Founders, Not Consultants
    • The heart of Customer Development
    • Iteratiowithout crisis
    • Fast, agile and opportunistic
    • Fueled by Customer Feedback
    • Heard by Founders, Not Consultants
    • The heart of Customer Development
    • Iteration without crisis
    • Fast, agile and opportunistic
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    56
  • A few rules from the “Blank Manifesto”
    Align all parties upfront…prepare to lose termsheets
    No VPs, no factories…MVP to the “champagne cork”
    No more business plans!
    Commit to Iterate and Pivot, “celebrate,” tolerate failure when it propels you forward
    Integrate Customer Development with Agile Manufacturing
    Agree to very different benchmarks and metrics
    Faster Cycle Times say Run like hell*
    57
  • When Doesn’t Customer Development work?
    Lack of “honest” commitment to Customer Development
    Progress over Passion
    Oops…we promised to ship on…
    Oops…the factory is about to open
    Founders delegate Discovery and Validation
    Too many times ‘round the barn
    Pharmaceuticals, regulation, innovation risk
    Too many MBA’s, not enough failure celebration
    58
  • So What Happens Next?
    50 Years After Toyota Invents Lean: …The Next Big Lean Revolution
  • 50 Years Later
    Customer & Agile Development change the rules for Consumer Internet startups
    Economics
    Development Cycle Time
    Easy, Overnight MVPs, Iterations, even Pivots
    Oceans of Fast, Cheap Feedback
    Time to market
    “No Money Down”
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    60
  • 50 Years Later – Full Circle
    Customer & Agile Development will change the rules in all industries
    Enterprise Software
    Consumer Hardware
    Everything else
    (c)2010 K+S Ranch Consulting Inc. www.steveblank.com
    61
  • Where to learn more:
    www.steveblank.com
  • Thanks…Now Go PIVOT!
    bob@kandsranch.com
    www.steveblank.com