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Vision, hypotheses and customer discovery

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Startups don't win because of a great vision, but because of a superior strategy. If you want to have the superior strategy, you must simply have a better customer insight. Customer discovery principles can help you to get real insights about your customers.

The first rule is to fall in love with a problem, not your solution or business idea. You must have a clear picture what your product is hired to do. With customer interviews and different types of tests your job is to prove value hypothesis (that people are prepared to pay for your solution).

You can write down all your hypotheses on business model canvas, running lean canvas or even in a spreadsheet. Then you have to constantly sketch out alternative business models by asking yourself difficult questions and testing different assumptions.

Steps to customer discovery include developing a vision, setting the hypotheses, getting out of the building and performing a reality checks. The best way to start the customer discovery process is with the riskiest assumptions.

Important tools that can help you with customer discovery are also segmentation, personas, empathy map and value proposition canvas. After exploiting all the tools you should have a clear picture what are your customer's pains and gains and what are they willing to pay for.

When you are doing the customer discovery interviews to get the market insights you have to avoid doing any behavior predictions or being satisfied with compliments, opinions or stalling. What are you looking for is a real commitment from early-evangelists.

Remember, wrong assumptions are mother of all fu*ck-ups, and with customer discovery you can make sure you are not building your business based on the wrong assumptions.

Published in: Business

Vision, hypotheses and customer discovery

  1. 1. MASTER OF STARTUPS SERIES VISION, HYPOTESES AND CUSTOMER DISCOVERY www.geekhouse.si/en
  2. 2. BLAZ KOS • 10+ years working with start-ups • Management of university incubator, technology park and business angel network • Management of two start-up accelerators and co-working space • PODIM Conference – one of the biggest conferences in Alps-Adriatic region • 600+ lectures in CEE • Mentored over 300 start-ups • Two handbooks about startups, 1500+ pages on two blogs I am on a life mission to make the world a more innovative, organized and transparent place to be by helping individuals, organizations and communities achieve their peak potential and an entirely new level of performance.
  3. 3. www.AgileLeanLife.com An entirely new level of personal performance.
  4. 4. Start-ups don‘t win because of great vision, but because of superior strategy. If you want to have superior strategy, you must have better customer insight.
  5. 5. CUSTOMER NEEDS YOUR BUSINESS VISION
  6. 6. VISION = PASSION
  7. 7. Follow your passion‘ is easily the worst advice you could ever give or get. The vision in not as important as the drive to achieve it. It‘s not the vision that makes the visionary; it‘s the driving force to make change happen. Don‘t follow your passions; follow your effort (determined attempt). It will lead you to your passions and to success.
  8. 8. Businesses that are run like hobbies pay like hobbies. NO MONEY NO VALUE
  9. 9. Don’t start business ”doing what you love” or ”doing what you know”. You will operate in industry where the service is commoditized. Therefore you will fight over every customer while you will earn fewer and fewer dollars. •Don‘t do what you love •Solve people‘s problems •Sell dreams
  10. 10. Fall in love with a PROBLEM, not SOLUTION (IDEA)
  11. 11. Segment Problem Product Technology Source: Lean Entrepreneur
  12. 12. WHAT JOB IS YOUR PRODUCT HIRED TO DO?
  13. 13. • Just because you have the problem doesn‘t mean there truly is an addressable market. • You may be biased toward a solution that the market majority doesn‘t want. • Your product is only as good as the problem it‘s solving and its suitability to the segment. Yet another cold reality Source: Lean Entrepreneur
  14. 14. YOUR VALUES • Describe what you hope your business to be • Size • Financial Potential • Number of Employees • Company Financing • Company Culture (should reinforce the values) • etc. • Set fundamental values of your business • Also determine your business vision
  15. 15. HYPOTHESES
  16. 16. Immortals? We will put their name to THE TEST.
  17. 17. • Problem/Pain • Product/Solution • MarketType • Market Segments • Pricing • Distribution • Customer creation • USP • … VALIDATED NOTVALIDATED VALUE HYPOTHESI GROWTH HYPOTHESI
  18. 18. SET OF HYPOTHESES Source: Business Model Canvas
  19. 19. Constantly sketch out alternative business models by asking yourself difficult questions. Transactional / Recurring revenues Niche / Mass market Product / Service Direct / Indirect Sales Scale / Scope Blue / Red Ocean CAPEX / Partnership Open / Closed Physical / Virtual Tailor Made / Mass Fixed / Variable Costs Paid / Free Advertising / Sales Insource / Outsource Distributed / Centralized Human / System Intensive Acquisition / Retention Disruptive / Incremental
  20. 20. SEARCH EXECUTE Source: Steve Blank, The Startup Manual
  21. 21. CUSTOMER DEVELOPMENT TEAM PRODUCT DEVELOPMENT TEAM
  22. 22. Customer development team Discovery Validation Demand Creation Execution Source: Steve Blank, The Startup Manual
  23. 23. CUSTOMER INSIGHT
  24. 24. STEPS TO CUSTOMER DISCOVERY • DEVELOP A VISION / CUSTOMER HYPOTHESIS • Document hypothesis: Guess (customer-problem-solution) • Business model hypothesis • GET OUT OF THE BUILDING • Find prospects to talk to (50+) • Reach out to prospects • Engage prospects • REALITY CHECK • Compile-measure-test • Problem-solution fit / MVP • Compile-Measure-Test II Source: Steve Blank, The Startup Manual
  25. 25. Core and Riskiest Assumptions CUSTOMER/PROBLEM • Customer Segmentation • Customer Problem • A day in life of Customer • Customer Influence Map • ROI for Customer • Minimum Feature Set PRODUCT/SOLUTION • Product Features • Product Benefits • Intellectual Property • Dependency Analysis • Product Delivery Schedule • Total Cost of Ownership VALUE HYPOTHESIS Source: Steve Blank, The Startup Manual
  26. 26. Source: The Startup Manual
  27. 27. STEPS TO CUSTOMER INSIGHT 1. Hypothesis 2. Segmentation 3. Empathy Map 4. Value Proposition Canvas 5. Personas 6. Get Out of The Building 7. Experiments
  28. 28. Problem Dream
  29. 29. Segment Clues • Different level of pain or passion • Seek to solve problem differently • Require different marketing • Require different distribution • Require different sales • Not necessarily demographic-based • Not „verticals“ Source: Lean Entrepreneur
  30. 30. Customer Clues • Who are they? -> Personas • Day in a Life of your Customer • Customer or buyer • Decision process chain • User • Influencer • Recommender • Decision maker • Economic Buyer • Sabotager
  31. 31. Costumer persona/archetype
  32. 32. EMAPTHY MAP
  33. 33. VALUE PROPOSITION CANVAS Source: Alexander Osterwalder
  34. 34. CUSTOMER PAINS • What do customers find too costly? • Money, Time, Effort • What are the customer difficulties? • What are the customer challenges? • What is keeping them wake at night? • Big issues, concerns, worries • How are current solutions underperforming? • What barriers are keeping customers from adopting? • Upfront investment costs • Learning curve • Resistance to change • What makes your customers feel bad? • Frustrations, annoyances, … • What risks do customers fear? • Financial, social, technical, …
  35. 35. CUSTOMER GAINS • Savings • Expectations • Current solution delights • How to make customers life easier? • Positive social consequences • What are they looking for? • What do they dream about? • How to increase likelihood of adoption?
  36. 36. GENCHI GENBUTSU Go to the source Get out of the building
  37. 37. DISCOVER LEARN ASK EXECUTE CONFIRM SELL
  38. 38. Anybody will say your idea is great if you annoy them for long enough. @robfitz
  39. 39. BEHAVIOUR PREDICTIONS (would buy) COMPLIMENTS OPINIONS STALLING INTERSETING = AVOID FAKE FEEDBACK
  40. 40. nteresting
  41. 41.  Pre-purchase  Trial subscription  Introduction to decision-maker  Referrals  Clear next meeting COMMITMENT LOOK FOR
  42. 42. GET OUT OF THE BUILDING IDEAS • Interview potential customers • Set up a booth • Do a public demo • Put your office where your customers are • Throw a party • Talk to experts in the field • Find the decision maker • Listen to what customers are demanding • Ask for introduction • Pre-order • Landing pages • Ask for the introduction BE WHERE YOUR CUSTOMERS ARE
  43. 43. GOAL OF CUSTOMER INTERVIEWS IS TO FIND AN ANSWER TO THE FOLLOWING QUESTIONS • Who your customers are • The specific problem your potential customers have • Why this is a problem for them • How painful this problem is for them • What happens when the problem is not solved • How they are currently solving this problem, and what else they’ve tried • How much this problem, when solved, is worth to them • How they find out about solutions to this problem • The words your customers to describe this problem
  44. 44. Stakeholders Potential people to talk to • Customers • Partners • Industry experts • Friends • Investors • Founders • Lawyers • Recruiters • Trade magazines • Business reference books • Accountants • … Sent e-mail Phone call Meeting and presentation Follow up call Second meeting TYPE OF COMMITMENT?
  45. 45. INTERVIEW – DO Take notes Be kind and smile Ask questions Understand their story Listen INTERVIEW – DON‘T Sell (OBSERVE REACTIONS) Talk too much about your product Ask leading questions Suggest answers Interview your mother Talk much
  46. 46. • “Have you ever….” “And then what happened…” “Why (or how) did you do that…” “Can you say more about that…” • Tell me about the last time you… • Tell me about an experience you‘ve had with… • How did you feel when … happened? • What were you feeling at that moment? • Really, can you tell me why that matters? DON‘T ASK FOR OPINIONS!!! Look for examples from real life.
  47. 47. Interview Structure 1/3 WHO YOU ARE • What is your name and role at your company? • How do you fit into your company’s department structure? Overall in the company? • What is your budget like? Who has to approve your purchases? • How do you discover new products for work? Do you need any approval to try them? • Have you tried anything new recently? • What is a typical day like on your job? • How much time do you spend doing [task X]? Source: Jason Vanish Blog
  48. 48. Interview Structure 2/3 WHAT ARE YOUR GRAITEST PAINS • What are your top 3 challenges you face in your job? • What are your top 3 challenges you face in your job related to [industry X]? (Industry X being the one your startup is in) • If you could wave a magic wand and instantly have a solution to any of those problems…what would the solution be? • Dig deeper into their typical day on anything that sounds painful or expensive. How have you dealt with or solved [Problem X]? Source: Jason Vanish Blog
  49. 49. Interview Structure 3/3 SOLUTION – RESPONSE/BEHAVIOUR NOT OPINIONS! • Walk them through the problems you believe your solution solves. Do they agree? • Does [your solution] solve any of their problems? • Would you be willing to pay for our solution? How much? (Don’t be afraid to probe for the pricing you know you want…”Would [X] be reasonable?”) • If they’re willing to pay your price and like the idea then…”Would you be willing to start right away?” Source: Jason Vanish Blog
  50. 50. If you didn’t take any notes, you weren’t doing customer development. “Yes,” means no. “Where can I buy that?” means maybe. “Here’s $20 dollars,” means yes.
  51. 51. EARLY-EVANGELSITS •You know they have a problem •They know they have a problem •Actively looking for a solution •Put together a solution out of piece parts •Budget
  52. 52. (sources and references) Learn More Steve Blank @sgblank http://steveblank.com/ Eric Ries @EricRies http://startuplessonslearned.com/ Ash Maurya @ashmaurya http://ashmaurya.com/ Dave McClure @davemcclure http://davemcclure.com/ Alex Osterwalder @AlexOsterwalder http://alexosterwalder.com Brad Feld @bfeld http://feld.com/

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