Customer Development
in the High Tech Enterprise


 MBA 295-F/EMBA 295-F

 Customer Discovery: Part 1

           Steve Bl...
Agenda
           Case: WebVan
      

           Startup Hypothesis
      

           Testing the Problem
      

   ...
Webvan Case




              3
Customer Discovery: Step 1
    Customer          Customer               Customer         Company
    Discovery         Val...
Customer Discovery: Step 1

      Customer           Customer               Customer          Company
      Discovery     ...
Methodology

    Customer Development can take months or years


    Each Step has a set of phases


    Plan what you n...
Before You Start

    Board and Management Buy-In


        Learning and discovery not execution
    

    Customer Deve...
Modify the Process for
                Your Company

    Text Example = Enterprise Software Co.


    You need to develop...
Discovery = Hypothesis Testing


       What are Hypothesis?
   

       Where do Hypothesis come from?
   

       Why ...
Customer Discovery: Step 1


          Customer          Customer               Customer         Company
          Discove...
Customer Discovery

                         Phase 3                            Phase 4
           Customer
              ...
Customer Discovery
                                              Hypotheses
                     Customer           Distri...
Customer Discovery
                                       Hypotheses
                         Inside the Building
        ...
Phase 1: Author Hypothesis


                                          One-time writing exercise
 Phase 3                 ...
Hypothesis
             Product
      

             Customer/Problem
      

             Distribution/Pricing
      
...
Product Hypotheses

      Features
  

      Benefits
  

      Product Delivery Schedule
  

      Intellectual Proper...
Intermission

The Customer Development Team




                                17
Traditional organizations
                           and titles Fail
    Typical Startup
                                 ...
Customer Development Team
             Tasks Not Titles
Customer Development
    Driven Startup




                      ...
End of Intermission




                      20
Customer/Problem Hypotheses

       Types of Customers/Archetypes
   

       Magnitude of the problem
   

       Visio...
Distribution/ Pricing Hypotheses

      Distribution Model
  

      Distribution Diagram
  

      Sales Cycle/Ramp
  ...
Demand Creation Hypotheses

    How do competitors create demand?


    How will you?


      Dave McClure’s AARGH mode...
Type of Market Hypotheses

    Positioning and Differentiation


        Existing Market
    

             The product ...
Competition Hypotheses


    Who is out there?


    Why are they important?


    How do customers use them today?


 ...
Next Week: Discovery Part 2

    Read


        Christensen
    

               Discovering What Has Already Been Disco...
XP                                           Phases
                      (Extreme Programming)


    XP by far most commo...
MBA295-F   Customer Development in the High-Tech Enterprise   Spring 2009
XP                                         Practices
                 (Extreme Programming)

      Planning game
  

    ...
MBA295-F   Customer Development in the High-Tech Enterprise   Spring 2009
XP (Extreme Programming)
                Roles and Responsibilities

       Programmer
   
         writes tests and the...
XP (Extreme Programming) Practices
               Collective ownership
           
                 anyone can change an...
Scrum Phases


    Pregame


        Planning - define system. Product Backlog
    

        Architecture - high level d...
Scrum




 MBA295-F   Customer Development in the High-Tech Enterprise   Spring 2009
Scrum Practices
     Product Backlog


       Current prioritized list of work to be done

     Effort Estimation


   ...
Scrum Roles and Responsibilities

      Scrum Master
  
           project following rules and practices
      

      P...
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Customer Development 4: Customer Discovery Part 1

  1. 1. Customer Development in the High Tech Enterprise MBA 295-F/EMBA 295-F Customer Discovery: Part 1 Steve Blank sblank@kandsranch.com 1
  2. 2. Agenda Case: WebVan  Startup Hypothesis  Testing the Problem  Customer Development Team  Testing the Product Concept  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  3. 3. Webvan Case 3
  4. 4. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building Existing Market: 1 Month – 1 Year Resegmenting a Market: 6 Months – 3 Years New Market: 1 Year – 3 Years MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  5. 5. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building Existing : 1-6 Months Resegmenting: 3-12 Months New: 1-2 Years MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  6. 6. Methodology Customer Development can take months or years  Each Step has a set of phases  Plan what you need to learn in writing so everyone knows:   what they should be doing  when they should do it  If they succeeded  If they need to do more These are checklists, not the inviolable commandments  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  7. 7. Before You Start Board and Management Buy-In  Learning and discovery not execution  Customer Development Team  Not traditional hires  Sufficient funding for 2-3 passes  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  8. 8. Modify the Process for Your Company Text Example = Enterprise Software Co.  You need to develop your own  Specifically for your company/market  Don’t quibble about details but understand there is a  process MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  9. 9. Discovery = Hypothesis Testing What are Hypothesis?  Where do Hypothesis come from?  Why Test them?  How do you test them?  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  10. 10. Customer Discovery: Step 1 Customer Customer Customer Company Discovery Validation Creation Building Stop selling, start listening  Test your hypotheses  Two are fundamental: problem and product concept  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  11. 11. Customer Discovery Phase 3 Phase 4 Customer Test Verify, Iterate & Discovery Product Expand Hypothesis To Validation Phase 1 Phase 2 Author Test Hypothesis Problem Hypothesis MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  12. 12. Customer Discovery Hypotheses Customer Distribution Demand Market Type Product Competitive & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Test “Problem” Hypothesis “Problem” Customer Market Friendly Presentation Understanding Knowledge First Contacts Test “Product” Hypothesis “Product” Yet More Second First Reality Presentation Customer Reality Check Check Visits Verify Verify the Iterate or Verify the Verify the Business Exit Problem Product MBA295-F Customer Development in the High-Tech Enterprise Spring 2009 Model
  13. 13. Customer Discovery Hypotheses Inside the Building Customer Distribution Demand Market Type Product Competitive & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Test “Problem” Hypothesis “Problem” Customer Market Friendly Presentation Understanding Knowledge First Contacts Outside the Building Test “Product” Hypothesis “Product” Yet More Second First Reality Presentation Customer Reality Check Check Verify Visits Verify the Verify the Iterate or Verify the Problem Business Exit Product MBA295-F Customer Development in the High-Tech Enterprise Spring 2009 Model
  14. 14. Phase 1: Author Hypothesis One-time writing exercise Phase 3 Phase 4  Product Iterate & Concept Expand All other time spent in  Testing front of customers Assumes you’re smart but Phase 1  guessing Phase 2 Author Test Problem Hypothesis Hypothesis MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  15. 15. Hypothesis Product  Customer/Problem  Distribution/Pricing  Demand Creation  Market Type  Competition  Customer Distribution Demand Market Type Product Competitive & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  16. 16. Product Hypotheses Features  Benefits  Product Delivery Schedule  Intellectual Property  Total Cost of Ownership  Dependency Analysis  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  17. 17. Intermission The Customer Development Team 17
  18. 18. Traditional organizations and titles Fail Typical Startup CEO VP Engineering VP Marketing VP Sales VP Business Dev People equate their titles with their functions  But standard titles describe execution functions  We need new titles = learning & discovery functions  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  19. 19. Customer Development Team Tasks Not Titles Customer Development Driven Startup CEO VP Product Dev Technical Visionary Business Visionary Business Execution In Front of Customers MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  20. 20. End of Intermission 20
  21. 21. Customer/Problem Hypotheses Types of Customers/Archetypes  Magnitude of the problem  Visionaries  A Day in the Life of a customer  Organizational impact  ROI Justification  Problem Recognition  Minimum Feature Set  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  22. 22. Distribution/ Pricing Hypotheses Distribution Model  Distribution Diagram  Sales Cycle/Ramp  Channel strategy  Pricing (ASP, LTV)  Customer Organization Map  Demand Creation  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  23. 23. Demand Creation Hypotheses How do competitors create demand?  How will you?   Dave McClure’s AARGH model Who are influencers/recommendors?  Key trade shows?  Key trends?  Start assembling advisory board  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  24. 24. Type of Market Hypotheses Positioning and Differentiation  Existing Market  The product is the basis of competition  New Market  Creating the market is the basis of competition  Redefine Existing Market  Resegment the existing market is the basis of  competition MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  25. 25. Competition Hypotheses Who is out there?  Why are they important?  How do customers use them today?  What don’t customers like about them?  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  26. 26. Next Week: Discovery Part 2 Read  Christensen  Discovering What Has Already Been Discovered  Note on Lead User Research  Blank  Four Steps to the E.piphany – Chapter 3  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  27. 27. XP Phases (Extreme Programming) XP by far most common agile method  Exploration   customers write story cards  Project team becomes familiar with tools, technology and practices Planning   set priority of stories & contents first release Iterations to Release   iterations before releases Productionizing   extra testing & checking before release to customer Maintenance and Death   new iterations and no more more customer stories MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  28. 28. MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  29. 29. XP Practices (Extreme Programming) Planning game   programmers estimate effort of implementing cust stories customer decides about scope and timing of releases  Short releases   new release every 2-3 months Simple design   emphasis on simplest design Testing   development test driven. Unit tests before code Refactoring   restructuring and changes to simplify Pair Programming   2 people at 1 computer MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  30. 30. MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  31. 31. XP (Extreme Programming) Roles and Responsibilities Programmer   writes tests and then code Customer   writes stories and functional tests Tester   helps customer write tests and runs them Tracker   gives feedback on estimates and process on iterations Coach   person responsible for whole process Consultant   supplies specific technical knowledge needed Manager   makes decisions MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  32. 32. XP (Extreme Programming) Practices Collective ownership   anyone can change any part of the code at any time Continuous integration   new builds as soon as code ready 40 hour week   maximum 40-hour week. No overtime On-site customer   customer present and available full-time for team Coding standards   rules exist and are followed Open workspace   large room small cubicles Just rules   team has own rules but can be changed any at time MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  33. 33. Scrum Phases Pregame  Planning - define system. Product Backlog  Architecture - high level design of system  Development  Iterative cycles (sprints) - new/enhanced functionality  Postgame  Requirements satisfied - no new items or issues  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  34. 34. Scrum MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  35. 35. Scrum Practices Product Backlog   Current prioritized list of work to be done Effort Estimation   iterative on Backlog items Sprint   30 day iteration Sprint Planning Meeting   decide goals for next sprint and how team will implement Sprint Backlog   Product Backlog items for sprint Daily Scrum meeting   what doing, what will do, and any problems Sprint Review Meeting   present results of sprint MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
  36. 36. Scrum Roles and Responsibilities Scrum Master  project following rules and practices  Product owner  officially responsible for project  Scrum Team  project team  Free to organize as they see fit to achieve goals of each sprint Customer  participates in Backlog items  Management  Makes final decisions  MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
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