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Customer Development in High Tech:
   Sales, Marketing & Business Development in a Startup



                      MBA & ...
Class 2: Agenda
           Vertical Markets
       

           Case: In N Out
       

           Market Type
       
...
Customer Development


This is what our class is about


                    Customer Development
    Customer            ...
New Product Conundrum

    New Product Introduction methodologies

    sometimes work, yet sometimes fail
        Why?
  ...
A Plethora of Opportunities




Customer Development in the High-Tech Enterprise   Spring 2009
                           ...
Startup Checklist – 1
          What Vertical Market am I In?

    Web 2.0                                    Semicondutor...
Market Risk vs. Invention Risk




  Customer Development in the High-Tech Enterprise   Spring 2009
                      ...
Startup Checklist - 2

    Market Risk?


    Technical Risk?


    Both?





       Customer Development in the High-...
Execution: Lots to Worry About




  Customer Development in the High-Tech Enterprise   Spring 2009
                      ...
Startup Checklist - 3

    Opportunity                       Where does the idea come from?

    Innovation              ...
Execution: Very Different by Vertical




     Customer Development in the High-Tech Enterprise   Spring 2009
            ...
Market Risk Reduction Strategy




  Customer Development in the High-Tech Enterprise   Spring 2009
                      ...
So Why Are We Talking About This?



        Existing Market         Resegmented            New Market
                   ...
In-N-Out Case




                14
In-N-Out Secret Menu

    X by Y                                                Grilled Cheese
                          ...
In-N-Out Meat Factory




Customer Development in the High-Tech Enterprise   Spring 2009
                                 ...
Market Type
Who Cares?




              17
Type of Market
                    Changes Everything
              Existing Market          Resegmented              New ...
Definitions: Three Types of Markets
           Existing Market         Resegmented         New Market
                    ...
Existing Market Definition

    Are there current customers who would:


        Need the most performance possible?
    ...
Existing Market


                                                   Our Company
        Performance

                    ...
Oops, forgot about Time


                                                     Our Company
    Performance

              ...
Existing Market Risks

    “Better/Faster” is an engineering driven axiom


    Incumbents defend high-end, high-margin
...
Resegmented Market Definition (1)
                               Low End

    Are there customers at the low end of the ma...
Low-end Resegmentation
                 “Good Enough” Performance

  Performance

                  Existing
             ...
Resegmented Market Definition (2)
                                     Niche

    Are there customers in the current marke...
Niche Resegmentation
                      “Branding” has its place


                                      Existing Custo...
Resegmented Market Risks

    “Cheaper” is a sales-driven axiom


    Incumbents abandon low-end, low-margin

    busine...
New Market Definition

    Is there a large customer base who couldn’t do

    this before?
        Because of cost, avai...
New Market
              Customers That Don’t Yet Exist

                                    Existing Customers
          ...
New Market Risks

    “New” is a marketing-driven axiom


    New has to be unique enough that:


        There is a lar...
Hybrid Markets

    Some products fall into Hybrid Markets


    Combine characteristics of both a new

    market and l...
Next Week
    Read

        CASE: E.Ink and E.Ink 2005
    

        Boyd – OODA Loop PowerPoint slides
    

        F...
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Customer Development 2: Three types of markets

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Transcript of "Customer Development 2: Three types of markets"

  1. 1. Customer Development in High Tech: Sales, Marketing & Business Development in a Startup MBA & EMBA 295-F Three Types of Markets Steve Blank sblank@kandsranch.com 1/27/09 1
  2. 2. Class 2: Agenda Vertical Markets  Case: In N Out  Market Type  Definitions  Examples  Risks  Customer Development  Definitions  Market Type effects  Customer Development in the High-Tech Enterprise Spring 2009 2
  3. 3. Customer Development This is what our class is about Customer Development Customer Scale Customer Customer Discovery Company Validation Creation Customer Development in the High-Tech Enterprise Spring 2009 3
  4. 4. New Product Conundrum New Product Introduction methodologies  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?  Customer Development in the High-Tech Enterprise Spring 2009 4
  5. 5. A Plethora of Opportunities Customer Development in the High-Tech Enterprise Spring 2009 5
  6. 6. Startup Checklist – 1 What Vertical Market am I In? Web 2.0 Semicondutors   Enterprise Software Electronic Design   Automation Enterprise Hardware  Cleantech Communciaton Hdw   Med Dev / Health Care Communication Sftw   Life Science / Biotech Consumer Electronics   Personalized Medicine Game Software   Customer Development in the High-Tech Enterprise Spring 2009 6
  7. 7. Market Risk vs. Invention Risk Customer Development in the High-Tech Enterprise Spring 2009 7
  8. 8. Startup Checklist - 2 Market Risk?  Technical Risk?  Both?  Customer Development in the High-Tech Enterprise Spring 2009 8
  9. 9. Execution: Lots to Worry About Customer Development in the High-Tech Enterprise Spring 2009 9
  10. 10. Startup Checklist - 3 Opportunity Where does the idea come from?  Innovation Where is the innovation?  Customer Who is the User/Payer?  Competition Who is the competitor/complementor?  Sales What is the Channel to reach the customer?  Marketing: How do you create end user demand?  What does Biz Dev do? Deals? Partnerships? Sales?  Business/Revenue Model(s) How do we organize to make money?  IP/PatentsRegulatory Issues? How and how long?  Time to Market How long does it take to get to market?  Product Development Model How to you engineer it?  Manufacturing What does it take to build it?  Seed Financing How much? When?  Follow-on Financing How much? When?  Liquidity How much? When?  Customer Development in the High-Tech Enterprise Spring 2009 10
  11. 11. Execution: Very Different by Vertical Customer Development in the High-Tech Enterprise Spring 2009 11
  12. 12. Market Risk Reduction Strategy Customer Development in the High-Tech Enterprise Spring 2009 12
  13. 13. So Why Are We Talking About This? Existing Market Resegmented New Market Market Customer Development in the High-Tech Enterprise Spring 2009 13
  14. 14. In-N-Out Case 14
  15. 15. In-N-Out Secret Menu X by Y Grilled Cheese   X meat patties and Y slices of cheese Two slices of melted cheese, tomato,   (for example, a 3 by 3 or a 2 by 4) lettuce and spread on a bun, with no meat. Double Meat Extra Everything   Two meat patties without cheese. Adds extra spread, tomato, lettuce, and   onions (regular or grilled). Triple Meat  Fries quot;Lightquot; Three meat patties without cheese.   Almost raw fries that are cooked for less Animal Style   time. A mustard cooked beef patty served on a  Fries quot;Wellquot; (aka quot;Welliesquot;) bun with pickles, lettuce, tomatoes, extra  spread and grilled onions. Any burger Fries that are cooked longer to be extra  (including veggie and grilled cheeses) may crisp. be made this way. Cheese Fries  Flying Dutchman Fries with two slices of melted cheese   Two meat patties, two slices of melted placed on top.  cheese and nothing else. Animal Style Fries  Protein Style Fries with cheese, spread, and grilled   Instead of a bun, the burger is wrapped in onions.  lettuce. Any burger (including veggie and Neapolitan Shake  grilled cheeses) may be made this way. All three shake flavors (strawberry, vanilla  Veggie Burger (Wish Burger) and chocolate) combined in one shake.  A burger without the meat and cheese.  Customer Development in the High-Tech Enterprise Spring 2009 15
  16. 16. In-N-Out Meat Factory Customer Development in the High-Tech Enterprise Spring 2009 16
  17. 17. Market Type Who Cares? 17
  18. 18. Type of Market Changes Everything Existing Market Resegmented New Market Market Market Sales  • Customers  Market Size Sales Model • Needs   Cost of Entry Margins • Adoption   Sales Cycle Launch Type   Chasm Width Competitive • Finance   Barriers • Ongoing Capital Positioning • Time to Profitability  Customer Development in the High-Tech Enterprise Spring 2009 18
  19. 19. Definitions: Three Types of Markets Existing Market Resegmented New Market Market 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  Customer Development in the High-Tech Enterprise Spring 2009 19
  20. 20. Existing Market Definition Are there current customers who would:  Need the most performance possible?  Is there a scalable business model at this point?  Is there a defensible business model  Are there sufficient barriers to competition from  incumbents? Customer Development in the High-Tech Enterprise Spring 2009 20
  21. 21. Existing Market Our Company Performance Existing Companies Customer Development in the High-Tech Enterprise Spring 2009 21
  22. 22. Oops, forgot about Time Our Company Performance Existing th ow nce G r Companies ma fo r er Today pany P om C g E x is tin Time Customer Development in the High-Tech Enterprise Spring 2009 22
  23. 23. Existing Market Risks “Better/Faster” is an engineering driven axiom  Incumbents defend high-end, high-margin  businesses Factor in:  Network effect of incumbent  Sustaining innovation of incumbent  Industry (or you own) “standards”  “They’ll never catch up” is not a business strategy  Established companies almost always win  Customer Development in the High-Tech Enterprise Spring 2009 23
  24. 24. Resegmented Market Definition (1) Low End Are there customers at the low end of the market  who would: buy less (but good enough) performance  if they could get it at a lower price?  Is there a business profitable at this low-end?  Are there sufficient barriers to competition from  incumbents? Customer Development in the High-Tech Enterprise Spring 2009 24
  25. 25. Low-end Resegmentation “Good Enough” Performance Performance Existing th ow nce G r Companies ma fo r er Today pany P om C g E x is tin Our Company At the Low-end Time Customer Development in the High-Tech Enterprise Spring 2009 25
  26. 26. Resegmented Market Definition (2) Niche Are there customers in the current market who  would: buy if it addressed their specific needs  if it was the same price?  If it cost more?  Is there a defensible business model at this point?  Are there barriers to competition from incumbents?  Customer Development in the High-Tech Enterprise Spring 2009 26
  27. 27. Niche Resegmentation “Branding” has its place Existing Customers New Niches Performance ny a C om p ew N a h e fo r ic N ny a C om p ew N a h e fo r ic N y n om pa gC n E x is ti Time Customer Development in the High-Tech Enterprise Spring 2009 27
  28. 28. Resegmented Market Risks “Cheaper” is a sales-driven axiom  Incumbents abandon low-end, low-margin  businesses For sometimes the right reasons  Low-end must be coupled with a profitable  business model Up migration  Customer Development in the High-Tech Enterprise Spring 2009 28
  29. 29. New Market Definition Is there a large customer base who couldn’t do  this before? Because of cost, availability, skill…?  Did they have to go to an inconvenient, centralized  location? Are there barriers to competition from  incumbents? Customer Development in the High-Tech Enterprise Spring 2009 29
  30. 30. New Market Customers That Don’t Yet Exist Existing Customers New Niches Performance New Customers New Markets y an C om p g n E x is ti t M arke N ew Time Customer Development in the High-Tech Enterprise Spring 2009 30
  31. 31. New Market Risks “New” is a marketing-driven axiom  New has to be unique enough that:  There is a large customer base who couldn’t do  this before They want/need/can be convinced  Adoption occurs in your lifetime  Company manages adoption burn rate  Investors are patient and have deep pockets  Customer Development in the High-Tech Enterprise Spring 2009 31
  32. 32. Hybrid Markets Some products fall into Hybrid Markets  Combine characteristics of both a new  market and low-end resegmentation SouthWest Airlines  Dell Computers  Cell Phones  Apple IPhone?  Customer Development in the High-Tech Enterprise Spring 2009 32
  33. 33. Next Week Read  CASE: E.Ink and E.Ink 2005  Boyd – OODA Loop PowerPoint slides  Fast Company : The Strategy of a Fighter pilot  McGrath & MacMillan: Entrepreneurial Mindset  Chapter 10 pages 231-245 Blank – Four Steps to the E.piphany Chapter  Due: Application Exercise 1  Customer Development in the High-Tech Enterprise Spring 2009 33
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