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Introduction to Customer Development at the Lean Startup Intensive at Web 2.0 Expo by Steve Blank
 

Introduction to Customer Development at the Lean Startup Intensive at Web 2.0 Expo by Steve Blank

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Presentation by Steve Blank at the Lean Startup Intensive at the Web 2.0 Expo May 3, 2010 in SF

Presentation by Steve Blank at the Lean Startup Intensive at the Web 2.0 Expo May 3, 2010 in SF

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  • Steve Blank has an additional screen for opportunity – the “Type of Market” Three types of markets Each with a radically different set of needs Palm in 1995 created a “New Market” Handspring in 2000 with the exact same product, entered an “Existing Market Microsoft with the Pocket PC, is attempting to “Resegment” the Market Why does this matter in weighing and assessing opportunity?
  • Each “type of market” is radically different Different ways to size the market opportunity Different sales costs Different demand creation costs Different time to liquidity Very different capital requirements And as we’ll see market type choices radically effect the Customer Development process.
  • In looking at how companies succeed and fail, their success tends to be organized around groupings of customers and markets. More importantly it is how these groupings of customers view their needs and how your new product satisfies those needs
  • IMVU started life as an “IM add-on” product. It sounded like a brilliant strategy – on a whiteboard.

Introduction to Customer Development at the Lean Startup Intensive at Web 2.0 Expo by Steve Blank Introduction to Customer Development at the Lean Startup Intensive at Web 2.0 Expo by Steve Blank Presentation Transcript

  • Customer Development Steve Blank Stanford - School of Engineering U.C. Berkeley - Haas School Of Business www.steveblank.com Twitter: sgblank Lean Startup Intensive at Web 2.0 Expo
  • I Wrote This
  • I Write a Blog www.steveblank.com
  • Early-Stage Ventures
  • What’s A Startup? Scalable Startup Large Company Transition
    • Business Model found
    • i.e. Product/Market fit
    • - Repeatable sales model
    • - Managers hired
    A Startup is the organization used to search for a scalable business model
  • Startups Search and Pivot Scalable Startup Large Company Transition
    • Business Model found
    • i.e. Product/Market fit
    • - Repeatable sales model
    • - Managers hired
    The Search for the Business Model
  • Startups Search, Companies Execute Scalable Startup Large Company Transition
    • Business Model found
    • Product/Market fit
    • - Repeatable sales model
    • - Managers hired
    - Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people The Search for the Business Model The Execution of the Business Model
  • How Do Startups Search For A Business Model?
    • The Search is called Customer Development
    • The Implementation is called Agile Development
  • Customer Development
  • More startups Fail from a Lack of Customers than from a Failure of Product Development
    • Then why do we have:
    • process to manage product development?
    • no process to manage customer development?
  • Product Development Model Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship
  • Tradition – Hire Marketing Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship Product Development
    • Create Marcom
    • Materials
    • - Create Positioning
    - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding” Marketing
  • Tradition – Hire Sales Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship Product Development
    • Create Marcom
    • Materials
    • - Create Positioning
    - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding”
    • Build Sales Organization
    Marketing Sales
    • Hire Sales VP
    • Hire 1 st Sales Staff
  • Tradition – Hire Bus Development Concept Product Dev. Alpha/Beta Test Launch/ 1 st Ship Product Development
    • Create Marcom
    • Materials
    • - Create Positioning
    - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding”
    • Hire Sales VP
    • Pick distribution Channel
    • Build Sales Channel / Distribution
    Marketing Sales
    • Hire First Bus Dev
    • Do deals for FCS
    Business Development
  • Tradition – Hire Engineering Concept Product Dev. Alpha/Beta Test Launch/ 1 st Ship Product Development
    • Create Marcom
    • Materials
    • - Create Positioning
    - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding”
    • Hire Sales VP
    • Pick distribution Channel
    • Build Sales Channel / Distribution
    Marketing Sales
    • Hire First Bus Dev
    • Do deals for FCS
    Business Development Engineering
    • Write MRD
    • Waterfall
    • Q/A
    • Tech Pubs
  • Two Startup Fallacies
    • Assumes customer problem is known
    • Assumes engineering solution is known
  • Consequences
    • Sales and Marketing costs are front loaded
    • Execution
    • Announcement is the goal
    • Hiring and revenue per “plan”
    • Iterate plan by firing execs
  • Conundrum
    • Processes to manage product development
    • No processes to manage customer development
  • An Inexpensive Fix
    • Test Customer/Market Hypotheses
    • Use an Engineering Process for Unknowns
    • How?
  • Customer Development Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship Product Development Customer Development Company Building Customer Discovery Customer Validation Customer Creation +
  • Customer + Agile Development Agile Development + Customer Development Company Building Customer Discovery Customer Validation Customer Creation
  • Key Ideas
    • Tests unknowns in Business Model
    • Parallel process to Product Development
    • Measurable Checkpoints
    • Not tied to shipment , but customer milestones
    • Stop selling, start listening
    • Test your hypotheses
    Customer Discovery Customer Discovery Customer Validation Company Building Customer Creation
  • Hypotheses
    • Problem/Need
      • Magnitude
      • Organizational impact
      • ROI Justification
      • Problem Recognition
    • Pricing
      • Revenue Model
      • Pricing
      • Demand Creation
    • Market Type
      • Existing
      • New
      • Resegment
    • Customer
      • Archetype(s)
      • A Day in the Life
    • Distribution
      • Channel
      • Sales Cycle/Ramp
      • Channel strategy
      • Organization Map
      • Demand Creation
    • Product
      • Minimum Feature Set
      • Dependency Analysis
      • Benefits
      • Intellectual Property
      • Total Cost of Ownership
  • Discovery: Exit Criteria
    • Customers top problems ?
    • Product concept solve them ?
    • A day-in-the-life of a customer (archetypes)
    • Draw the org chart of users & buyers
  • Customer Validation Customer Discovery Customer Validation Customer Creation Company Building
    • Repeatable and scalable business model ?
    • Passionate earlyvangelists ?
    • Pivot back to Discovery if no customers
    Pivot
  • Earlyvangelists Budget Put Together a Solution out of Piece Parts Actively Looking For a Solution You Know They Have A Problem They Know They Have a Problem
  • Customer Validation: Rules
    • Sales roadmap, not sales staff
    • No sales staffing until the roadmap is proven
    • Tested customer acquisition model
    • Goal: prove a profitable business model
  • Customer Development is a Search for a Business Model
  • The Search for a Business Model
    • No Business Plan survives first contact with customers
    • A Business Model diagrams how a company creates, delivers and captures value
    • Or in English: How a company makes money
  • Emphasis On Hypotheses Testing
  • Startups Continually Pivot (Iterate)
  • Validation: Exit Criteria
    • Draw your business model ?
    • Understood sales cycle & sales roadmap?
    • Proven customer acquisition model?
    • Orders ($’s) validating the business model?
  • Customer Creation
    • Creation comes after proof of sales
    • $’s for scale
    • Lean Startups are not cheap startups
    Customer Discovery Customer Validation Company Building Customer Creation
  • Customer Creation Big Ideas
    • Grow customers from few to many
    • Positioning
    • Launch
    • Demand creation
    • Different for each of the Market Types
  • Sidebar Market Type
  • 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 ?
  • Three Types of Markets
    • Type of Market changes EVERYTHING
    • Sales, marketing and business development differ radically by market type
    Existing Market Resegmented Market New Market
  • 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
    Existing Market Resegmented Market New Market
  • Three Types of Markets
    • Existing Market
      • Faster/Better = High end
    • Resegmented Market
      • Niche = marketing/branding driven
      • Cheaper = low end
    • New Market
      • Cheaper/good enough = creates a new class of product/customer
      • Innovative/never existed before
    Existing Market Resegmented Market New Market
  • Company Building Customer Discovery Customer Validation Customer Creation Company Building
    • (Re)build company’s organization & management
    • Re look at your mission
  • What VC’s Don’t Tell You: The Transition Scalable Startup Large Company Transition Search Build Grow
  • What VC’s Don’t Tell You: The Transition – Founders Leave Scalable Startup Large Company Transition
    • Founders depart
    • Professional Mgmt
    • Process
    • Beginning of scale
  • Thanks www.steveblank.com
  • Backup
  • So What Does Engineering Do?
  • Traditional Product Development Unit of progress: Advance to Next Stage Problem: known Solution: known Waterfall Requirements Design Implementation Verification Maintenance Source: Eric Ries http://startuplessonslearned.blogspot.com
  • Agile Unit of progress: a line of working code Problem: Known Solution: Unknown “ Product Owner” or in-house customer Source: Eric Ries http://startuplessonslearned.blogspot.com
  • Product Development at Lean Startup Unit of progress: validated learning about customers ($$$) Problem: Unknown Solution: Unknown Source: Eric Ries http://startuplessonslearned.blogspot.com