1. How to Fail Less
Business Models and
Customer Development
Steve Blank
www.steveblank.com
@sgblank

2. Agenda – Day One
• 9:00 - 11:00 Introduction to Customer Development
• 11:00 - 11:30 break
• 11:30 - 13:00 value proposition
customer segments
• 13:00 – 14:30 lunch working session
Students prepare first version of business model canvas
• 14:30 – 16:00 Student presentation of business
model canvas
• 16:00 – 16:15 break
• 16:15 – 17:00 distribution channels
Homework: 1) update your canvas
2)develop a customer discovery action plan

3. Agenda – Day One
• 9:00 - 11:00 Introduction to Customer Development
• 11:00 - 11:30 break
• 11:30 - 13:30 value proposition
customer segments
• 12:30 – 13:30 lunch working session
Students prepare first version of business model canvas
• 13:30 – 15:00 Student presentation of business
model canvas
• 15:00 – 15:15 break
• 15:30 – 16:30 distribution channels
Homework: 1) update your canvas
2)develop a customer discovery action plan

4. Agenda – Day Two
• 9:00 - 10:30 Student presentations on customer
discovery action plan
• 10:30 - 11:30 customer relationships (get/keep/grow)
• 11:30 – 12:00 break
• 12:00 - 13:00 revenue streams
• 13:00 – 14:00 lunch working session
Students present
• 13:30 – 14:15 partners
• 14:15 - 15:00 resources, activities, costs
• 15:00 – 15:15 break
• 15:30 – 16:30 Customer Development Manifesto

5. What We Used to Believe
Search Versus Execution

6. Startups are Smaller Versions of
Large Companies

7. What We Now Know
Search Versus Execution

8. Startups Search
Large Companies Execute

9. What We Used to Believe
Strategy

10. All I Need to Do is Execute the Plan

11. Actual Photo of What Happens When
Plan Meets
First Contact With Customers

13. All I Need is the 5- Year Forecast

14. Previous
5-Year Plans

15. All I Need to Do is Make the Forecast

16. What We Now Know
Strategy

17. Planning comes before the plan

18. Business Models

19. Business Models

20. Search Execution
Business Model Operating Plan +
Strategy
Hypotheses Financial Model

21. What We Used to Believe
Process

22. We Built Startups by
Managing Processes
Product Management
+
Waterfall Engineering

23. Product Introduction Model
Concept/ Product Alpha/Beta Launch/
Seed Round Dev. Test 1st Ship

24. Tradition – Hire Marketing
Concept/ Product Alpha/Beta Launch/
Seed Round Dev. Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”

25. Tradition – Hire Sales
Concept/ Product Alpha/Beta Launch/
Seed Round Dev. Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
• Hire Sales VP • Build Sales
Sales • Hire 1st Sales Staff Organization

26. Tradition – Hire Bus Development
Concept Product Alpha/Beta Launch/
Dev. Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
• Hire Sales VP • Build Sales Channel /
Sales • Pick distribution Distribution
Channel
Business • Hire First • Do deals for FCS
Development Bus Dev

27. Tradition – Hire Engineering
Concept Product Alpha/Beta Launch/
Dev. Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
• Hire Sales VP • Build Sales Channel /
Sales • Pick distribution Distribution
Channel
Business • Hire First • Do deals for FCS
Development Bus Dev
Engineering • Write MRD • Waterfall • Q/A •Tech Pubs

28. Product Introduction Model
Concept/ Product Alpha/Beta Launch/
Seed Round Dev. Test 1st Ship

29. Waterfall / Product Management
Execution on Two “Knowns”
Requirements
Product Features: known
Design
Implementation
Verification
Customer Problem: known Maintenance
Source: Eric Ries
http://startuplessonslearned.blogspot.com

30. Waterfall / Product Management
Execution on Two “Knowns”
Requirements
Product Features: known
Design
Implementation
Verification
Customer Problem: known Maintenance
Source: Eric Ries
http://startuplessonslearned.blogspot.com

31. What We Now Know
Strategy

32. More startups fail from
a lack of customers than from a
failure of product development

33. Customer Development
A Search Strategy

34. Search Execution
Strategy Business Model
Operating Plan +
Hypotheses
Financial Model
Process Customer & Product Management
& Agile Development
Agile Development

35. What We Used to Believe
Organization

36. Hire and Build a
Functional Organization

39. What We Now Know
Organization

40. Founders run a
Customer Development Team
No sales, marketing and business
development

41. Search Execution
Strategy Business Model
Operating Plan +
Hypotheses
Financial Model
Customer Development, Product Management
Process
Agile Development Agile or Waterfall Development
Customer Functional Organization
Organization
Development Team, by Department
Founder-driven

42. Search
Strategy Business Model
Hypotheses
Process
Customer Development,
Agile Development
Organization
Customer Development
Team, Founder-driven

43. Search Execution
Strategy Business Model
Operating Plan +
Hypotheses
Financial Model
Process Customer Development, Product Management
Agile Development Agile or Waterfall Development
Organization
Customer Development Functional Organization
Team, Founder-driven by Department

44. Part 2
Business Models and
Customer Development

45. What‟s A Startup?

46. A temporary organization
designed to search
for a repeatable and scalable
business model

47. A temporary organization
designed to search
for a repeatable and scalable
business model

48. A temporary organization
designed to search
for a repeatable and scalable
business model

49. A temporary organization
designed to search
for a repeatable and scalable
business model

50. A temporary organization
designed to search
for a repeatable and scalable
business model
A Startup aims to become a
company

51. What‟s a Business Model?

52. © 2012 Steve Blank

53. Value Proposition
What Are You Building and For Who?

54. © 2012 Steve Blank

55. Customer Segments
Who Are They?
Why Would They Buy?

56. © 2012 Steve Blank

57. Channels
How does your Product
Get to Customers?

58. © 2012 Steve Blank

59. Customer Relationships
How do you Get, Keep and Grow Customers?

60. © 2012 Steve Blank

61. Revenue Streams
How do you Make Money?

62. © 2012 Steve Blank

63. Key Resources
What are your most important Assets?

64. © 2012 Steve Blank

65. Key Partners
Who are your Partners and Suppliers?

66. © 2012 Steve Blank

67. Key Activities
What‟s Most Important for the Business?

68. © 2012 Steve Blank

69. Cost Structure
What are the Costs and Expenses

70. © 2012 Steve Blank

71. But,
Realize They‟re Hypotheses

72. 9 Guesses
Guess
Guess Guess
Guess
Guess
Guess Guess
Guess Guess

75. Customer Development
Test the Problem, Then the Solution

78. Customer Development
The Minimum Viable Product

80. Customer Development
The Pivot

82. Customer Development is
how you search for the model

87. How Does This Really Work?
Lean LaunchPad Class
8 Weeks, 100 Customer Calls

88. CBiRC, Iowa State University

90. CBiRC, Iowa State University
Bio-basedsustainable chemical intermediates for
polymer bio-surfactants, bio-lubricants
I-Corps Team
ShivaniGarg
Entrepreneurial Lead
Graduate student, 3.5 yrs in
biochemistry
Bio-based chemical Dr. Basil Nikolau
Principal Investigator
intermediates Professor, 30 yrs in biochemistry
Dr. Peter Keeling
I-Corps Mentor
Entrepreneur, 30 yrs in biotechnology
industry

91. Interviews conducted = 100
CBiRC, Iowa State University
Bio-basedsustainable chemical intermediates for
polymer bio-surfactants, bio-lubricants
I-Corps Team
ShivaniGarg
Entrepreneurial Lead
Graduate student, 3.5 yrs in
biochemistry
Bio-based chemical Dr. Basil Nikolau
Principal Investigator
intermediates Professor, 30 yrs in biochemistry
Dr. Peter Keeling
I-Corps Mentor
Entrepreneur, 30 yrs in biotechnology
industry

92. Value proposition
Problem Solution Features of value
proposition
• Non- • Sustainable, bio-based • Bi-functional molecules
renewable, petroleum replacement • Flexibility in chain length
derived feedstock for • Higher performance • Flexibility in branching
surfactant, lubricant • Improved cold
industry temperature tolerance of
detergents, lubricants

93. Growing market opportunity
Bio-based chemicals growing at 15% p.a.
$1 trillion
petrochemical market
$24 bn
surfactants

94. Position in Value Chain
OmegaChem

95. Business Model Canvas 1.0
•Co-create
•Production, yi value proposition
eld, quality Problem - Non- • Customer •Existing
•Match renewable goodwill and market Polymer
- Bio-mass
customer‟s feedstock for trust manufacturers,
suppliers
product specs making polymer • Customer Biotech
Solution communities companies,
- Contractual
(Product) – Bio-
scale-up
based and • New market -
sustainable Novel bio-plastic
-Technology •Manufacturing replacement companies?
providers facility Features - Bi- •Physical
•IP functional and product •Multi-sided
-Utility providers • Human customizable •Indirect channel market?
resources, capit •Wholesale
al
• Sell bio-based monomers
•Fixed – Capital • Added value pricing based on
Value•Variable – Manufacturing,
prop. hypothesis: Bio-mass
Bio-based and sustainable
customization of products
• Licensing?
Customer segment hypothesis: Polymer manufacturers, new markets
Test: Talked to biochemical companies

96. Value Proposition, Customer Segments:
Experiments
Talked to potential customers
Biochemical companies, Market research (15)
Senior Scientist
Vice-President, Technology Development R&D Director Senior Scientist
Senior Business Development Manager Research Scientist Market Research Analyst

97. Value Proposition, Customer Segments:
Results
Surfactants: new market ($24bn)
Monomer Monomer
manufacturer “Have you manufacturer
considered
surfactants
Polymer space?”
formulator Polymer Surfactant
- DSM formulator Formulator
Polymer Polymer Surfactant
user user user
Consumer facing Consumer facing
company company
Consumer Consumer

98. Value Proposition, Customer Segments: Iteration
Business Model Canvas 4.0
Problem - Non-
renewable
•Existing market
feedstock
Polymer
Solution – Bio-
manufacturers, Bi
based, sustainable
otech companies,
replacement
Surfactants,
Features - Bi-
Home &
functional,
Personal Care
customizable
sector
• „Drop-in‟
monomers
• New market -
•Diacids(chain
Novel bio-plastic
length: C10-C16)
companies?
•New
functionalities
•Multi-sided
(cyanide, amine)
market?
Channel hypothesis: Indirect channel of wholesale
Test: Talked to chemical distributors

99. Channels: Experiments
Here’s what we did…
Distributors (9)
Biochemical industry executives (3)

100. Channels: Results
Pivot: Entry barriers are key
Monomer
manufacturer
Distributor
High entry barriers Polymer Surfactant Low entry barriers
formulator formulator
(Petro-based is (Market pull for green
hard to dislodge.) Distributor products)
Polymer Surfactant
user user
“Petro industry
Consumer facing
wishes that you
company
guys did not
exist!”
- Draths
Consumer

101. Channels: Iteration
Business Model Canvas 5.0
Problem - Non- Existing markets
renewable feedstock •Polymer
manufacturers
Solution – Bio-
based, sustainable •Biotech companies
replacement
•Regional supply of Customer in value
surfactant raw- chain
material Formulator
• Avoidance of single companies
material sourcing
(petro)
• Green Existing market
•Physical product sectors
Features - Bi- •Indirect channel •Surfactants
functional, customiz •Wholesale
able Distributors •Home & Personal
• „Drop-in‟ monomers Care sector
Customer Relationship Hypothesis: Co-create value proposition
Tests: Talked to surfactant/lubricant companies

102. Customer Relationships: Experiments
Here’s what we did…
Surfactants (4) Lubricants (4)
Business Marketing Leader
Research Scientist Technical Director
Senior Scientist
Catalyst Research
Principal Scientist Engineer
Director, R&D Tribology Section Leader
Other bio-based companies (6)
Biobased Chemicals Analyst
President, Personal Care
Program Manager
Vice-President, R&D
Senior Scientist, R&D Global Head, R&D

103. Customer Relationships: Results
Here’s what we found…
Monomer
manufacturer
Distributor
Surfactant users influence
Surfactant surfactant formulator
formulator decisions, so need to
partner with surfactant users
Surfactant first!
user
Decision Green Panel – Focus on
Makers
reducing petroleum based
Consumer facing products
company
Consumer
Market Pull
(Sustainability
agenda)

104. Customer Relationships: Iteration
Business Model Canvas 6.0
Problem - Non- •Co-create value
renewable feedstock proposition
Solution – Bio- • Customer goodwill Customer in value
based, sustainable and trust chain
replacement • Customer Formulator
•Regional supply of communities companies
surfactant raw- •Trade-shows, PR
material •Conferences, surve
• Avoidance of single ys Existing market
material sourcing
sectors
(petro)
•Surfactants
• Green
•High-performance
•Lubricants
Features - Bi-
•Home & Personal
functional,
Care sector
customizable
• „Drop-in‟ monomers
Revenue Model Hypothesis: Value-based pricing, licensing
Tests: 1. Developed a product sheet
2. Talked to 7 surfactant companies
3. Talked to 6 production economics experts

105. Revenue model: Hypothesis
Payment Flow Hypothesis
Biomass
Biomass 15 c/lb*
supplier Biomass Range 5-20c/lb
Monomer
manufacturer Monomer ?
Detergent alcohols 80c/lb
Distributor
Surfactant Formulation ?
formulator Formulated Surfactant 90c/lb
Surfactant Surfactant 100 c/lb*
Decision user Formulated Detergent 100c/lb
Makers
Consumer facing Detergent 200 c/lb*
company 10% Surfactant in Detergent
Consumer Product
*ICIS Market Intelligence, 201

106. Revenue model: Result 1
Payment Flow
Biomass
Biomass 15 c/lb*
supplier Biomass Range 5-20c/lb
Monomer
manufacturer Monomer 80 c/lb
Detergent alcohols 80c/lb
Distributor
Surfactant Formulation 90 c/lb
formulator Formulated Surfactant 90c/lb
Surfactant Surfactant 100 c/lb
Decision user Formulated Detergent 100c/lb
Makers
Consumer facing Detergent 200 c/lb
company 10% Surfactant in Detergent
Consumer Product
*ICIS Market Intelligence, 201

107. Revenue model: Result 2
Scale up is the key
Less than 100 c/lb is achievable
Optimized scale up (~500,000 lb/day)
“You give us
1kg, we can
evaluate.”
Earlyvangelists

108. Revenue Model: Iteration
Business Model Canvas 7.0
•Production, yiel
d, quality
- Cheapest bio-mass
•Match customer‟s
suppliers
product specs
• Constant
- Contractual scale-
innovation
up
-Technology
providers
-Utility providers
- Surfactant Users
(P&G)
•Sell bio-based monomers
Partners Hypothesis: Bio-mass suppliers, scale-up, technology
• Added value pricing based on customization of
providers, utility providers, surfactant users products
•Create demand by partnering with Surfactant
Tests: Talked to potential partners Users and then sell to Formulators
• Licensing

109. Partners: Hypothesis
Here’s what we hypothesized…
Market Biomass
Research supplier
Partners Monomer
Start-up manufacturers
Incubators
Distributor
Scale-up Surfactant
providers formulator
Surfactant
Technology
Decision user
partners
Makers
Consumer facing
company
Consumer

110. Partners: Experiments
Here’s what we did…
Market Start-up Scale-up Technology
Research (3) Incubators (4) providers (4) partners (3)

111. Partners: Iterate
Business Model Canvas 8.0
-Market Research
Agencies
- Start-up incubators
Cheapest bio-mass
suppliers
- Contractual scale-
up
-Technology
providers
-Utility providers
- Surfactant Users
(P&G)
What‟s next?
State funding (i6 grant)
Federal funding (SBIR)

112. First to Last Business Model Canvas

113. First Canvas
Business Model Canvas 1.0
•Co-create
•Production, yi value proposition
eld, quality Problem - Non- • Customer •Existing
•Match renewable goodwill and market Polymer
- Bio-mass
customer‟s feedstock for trust manufacturers,
suppliers
product specs making polymer • Customer Biotech
Solution communities companies,
- Contractual
(Product) – Bio-
scale-up
based and • New market -
sustainable Novel bio-plastic
-Technology •Manufacturing replacement companies?
providers facility Features - Bi- •Physical
•IP functional and product •Multi-sided
-Utility providers • Human customizable •Indirect channel market?
resources, capit •Wholesale
al
• Sell bio-based monomers
•Fixed – Capital • Added value pricing based on
•Variable – Manufacturing, Bio-mass customization of products
• Licensing?

114. Final Canvas
Business Model Canvas 8.0
Problem - Non- •Co-create value
renewable feedstock proposition
-Market Research •Production, yiel
Solution – Bio- • Customer goodwill
Agencies d, quality Customer in value
based, sustainable and trust
•Match customer‟s chain
replacement • Customer
- Start-up incubators product specs Formulator
•Regional supply of communities
• Constant companies
surfactant raw- •Trade-shows, PR
Cheapest bio-mass innovation
material •Conferences,
suppliers
• Avoidance of single surveys Existing market
material sourcing
- Contractual scale- sectors
(petro)
up •Surfactants
• Green
•Manufacturing •High-performance
-Technology facility •Physical product •Lubricants
providers •IP •Indirect channel
Features - Bi-
• Human •Wholesale •Home & Personal
functional, customiz
- Surfactant Users resources, capital Distributors Care sector
able
(P&G) •IHS (Market Info) •„Drop-in‟ monomers
•Sell bio-based monomers
•Fixed – Capital •Create demand by partnering with Surfactant
•Variable – Manufacturing, Bio-mass Users and then sell to Formulators
• Licensing

115. Evolution of Canvas

116. Business Model Canvas 1.0
•Co-create
•Production, yi value proposition
eld, quality Problem - Non- • Customer •Existing
•Match renewable goodwill and market Polymer
- Bio-mass
customer‟s feedstock for trust manufacturers,
suppliers
product specs making polymer • Customer Biotech
Solution communities companies,
- Contractual
(Product) – Bio-
scale-up
based and • New market -
sustainable Novel bio-plastic
-Technology •Manufacturing replacement companies?
providers facility Features - Bi- •Physical
•IP functional and product •Multi-sided
-Utility providers • Human customizable •Indirect channel market?
resources, capit •Wholesale
al
• Sell bio-based monomers
•Fixed – Capital • Added value pricing based on
•Variable – Manufacturing, Bio-mass customization of products
• Licensing?

117. Business Model Canvas 2.0
Problem - Non- •Co-create
•Production, yi value proposition •Existing
renewable
eld, quality • Customer market Polymer
feedstock for
•Match goodwill and manufacturers,
- Bio-mass making polymer
customer‟s trust Biotech
suppliers Solution
• Customer companies,
product specs (Product) – Bio-
communities Surfactant
- Contractual based and
manufacturers
scale-up sustainable
•Manufacturing replacement
• New market -
-Technology facility Features - Bi-
Novel bio-plastic
providers •IP functional and •Physical companies?
• Human customizable product
-Utility providers resources, capit • „Drop-in‟ •Indirect channel •Multi-sided
al monomers •Wholesale market?
•SRI (Market •Diacids
Info)
• Sell bio-based monomers
•Fixed – Capital • Added value pricing based on
•Variable – Manufacturing, Bio-mass customization of products
• Licensing?

118. Business Model Canvas 3.0
Problem - Non-
renewable •Co-create
•Production, yi feedstock value proposition •Existing
eld, quality Solution – Bio- • Customer market Polymer
- Bio-mass •Match based, sustainable goodwill and manufacturers,
suppliers customer‟s replacement trust Biotech
product specs Features - Bi- • Customer companies,
- Contractual functional, customi communities Surfactant
scale-up zable manufacturers
•Manufacturing • „Drop-in‟
-Technology facility monomers • New market -
providers •IP •Diacids(chain •Physical Novel bio-plastic
• Human length: C10-C16) product companies?
-Utility providers resources, capit •New •Indirect channel
al functionalities •Wholesale •Multi-sided
•SRI (Market (cyanide, amine) market?
Info)
•State funding, SBIR funding
•Sell bio-based monomers
•Fixed – Capital
• Added value pricing based on
•Variable – Manufacturing, Bio-mass
customization of products
• Licensing

119. Business Model Canvas 4.0
Problem - Non-
renewable •Co-create
•Production, value proposition •Existing market
feedstock
• Customer Polymer
yield, quality Solution – Bio-
•Match goodwill and manufacturers, Bi
- Bio-mass based, sustainable
customer‟s trust otech companies,
suppliers replacement
product specs • Customer Surfactants,
Features - Bi-
communities Home &
- Contractual functional, customi
Personal Care
scale-up zable
sector
•Manufacturing • „Drop-in‟
-Technology facility monomers
• New market -
providers •IP •Diacids(chain •Physical Novel bio-plastic
• Human length: C10-C16) product companies?
-Utility providers resources, capit •New •Indirect channel
al functionalities •Wholesale •Multi-sided
•SRI IHS (cyanide, amine)
market?
(Market Info)
•State funding, SBIR funding
•Sell bio-based monomers
•Fixed – Capital
• Added value pricing based on
•Variable – Manufacturing, Bio-mass
customization of products
• Licensing

120. Business Model Canvas 4.3
Problem - Non- Existing markets
renewable feedstock •Polymer
•Co-create value
manufacturers
•Production, yiel proposition
Solution – Bio-
d, quality • Customer
based, sustainable •Biotech companies
•Match customer‟s goodwill and trust
- Bio-mass suppliers replacement
product specs • Customer
•Local supply of Customer in value
communities
- Contractual scale- surfactant raw- chain
up material Formulator
• Avoidance of single companies
-Technology material sourcing
providers (petro)
•Manufacturing • Green Existing market
-Utility providers facility •Physical product sectors
•IP Features - Bi- •Indirect channel •Surfactants
• Human functional, •Wholesale
resources, capital customizable Distributors •Home & Personal
•IHS (Market Info) • „Drop-in‟ monomers Care sector
•Sell bio-based monomers
•Fixed – Capital • Added value pricing based on customization of
•Variable – Manufacturing, Bio-mass products
• Licensing

121. Business Model Canvas 5.0
Problem - Non- Existing markets
renewable feedstock •Polymer
•Co-create value
manufacturers
•Production, yiel proposition
Solution – Bio-
d, quality • Customer
based, sustainable •Biotech companies
•Match customer‟s goodwill and trust
- Bio-mass suppliers replacement
product specs • Customer
•Regional supply of Customer in value
communities
- Contractual scale- surfactant raw- chain
up material Formulator
• Avoidance of single companies
-Technology material sourcing
providers (petro)
•Manufacturing • Green Existing market
-Utility providers facility •Physical product sectors
•IP Features - Bi- •Indirect channel •Surfactants
• Human functional, customiz •Wholesale
resources, capital able Distributors •Home & Personal
•IHS (Market Info) • „Drop-in‟ monomers Care sector
•Sell bio-based monomers
•Fixed – Capital • Added value pricing based on customization of
•Variable – Manufacturing, Bio-mass products
• Licensing

122. Business Model Canvas 6.0
Problem - Non- •Co-create value
renewable feedstock proposition
Solution – Bio- • Customer goodwill
•Production, yiel Customer in value
based, sustainable and trust
d, quality chain
replacement • Customer
•Match customer‟s Formulator
- Bio-mass suppliers •Regional supply of communities
product specs companies
surfactant raw- •Trade-shows, PR
- Contractual scale- material •Conferences, surve
up • Avoidance of single ys Existing market
material sourcing
sectors
-Technology (petro)
•Surfactants
providers • Green
•Manufacturing •High-performance
facility •Physical product •Lubricants
-Utility providers
•IP Features - Bi- •Indirect channel
• Human •Wholesale •Home & Personal
functional, customiz
resources, capital Distributors Care sector
able
•IHS (Market Info) • „Drop-in‟ monomers
•Sell bio-based monomers
•Fixed – Capital • Added value pricing based on customization of
•Variable – Manufacturing, Bio-mass products
• Licensing

123. Business Model Canvas 7.0
Problem - Non- •Co-create value
renewable feedstock proposition
•Production, yiel
Solution – Bio- • Customer goodwill
d, quality Customer in value
- Cheapest bio-mass based, sustainable and trust
•Match customer‟s chain
suppliers replacement • Customer
product specs Formulator
•Regional supply of communities
• Constant companies
- Contractual scale- surfactant raw- •Trade-shows, PR
innovation
up material •Conferences,
• Avoidance of single surveys Existing market
-Technology material sourcing
sectors
providers (petro)
•Surfactants
• Green
-Utility providers •Manufacturing •High-performance
facility •Physical product •Lubricants
- Surfactant Users •IP Features - Bi- •Indirect channel
• Human •Wholesale •Home & Personal
(P&G) functional, customiz
resources, capital Distributors Care sector
able
•IHS (Market Info) • „Drop-in‟ monomers
•Sell bio-based monomers
• Added value pricing based on customization of
•Fixed – Capital products
•Variable – Manufacturing, Bio-mass •Create demand by partnering with Surfactant
Users and then sell to Formulators
• Licensing

124. Business Model Canvas 8.0
Problem - Non- •Co-create value
-Market Research
renewable feedstock proposition
Agencies •Production, yiel
Solution – Bio- • Customer goodwill
d, quality Customer in value
based, sustainable and trust
- Start-up incubators •Match customer‟s chain
replacement • Customer
product specs Formulator
•Regional supply of communities
Cheapest bio-mass • Constant companies
surfactant raw- •Trade-shows, PR
suppliers innovation
material •Conferences, surve
• Avoidance of single ys
- Contractual scale- Existing market
material sourcing
up sectors
(petro)
•Surfactants
• Green
-Technology •Manufacturing •High-performance
providers facility •Physical product •Lubricants
•IP Features - Bi- •Indirect channel
-Utility providers • Human •Wholesale •Home & Personal
functional, customiz
resources, capital Distributors Care sector
able
- Surfactant Users •IHS (Market Info) • „Drop-in‟ monomers
(P&G)
•Sell bio-based monomers
•Fixed – Capital •Create demand by partnering with Surfactant
•Variable – Manufacturing, Bio-mass Users and then sell to Formulators
• Licensing

126. Total Contacts: 96
Red Ox’s Electrochemical Desalination Cell
1. desalinates brine, a waste product from oil & gas and other industries
2. generates electricity quietly and
3. produces bulk inorganics that can be sold as commodities.
André Taylor (PI) David Kohn (EL) Tom Livingston (IM)
National Science Foundation Innovation Corps Program May 23, 2012

127. Problem:
Saline brine.
What is it?
Water that is saltier than sea water.
It is produced as a waste product of many industrial
processes.
127

128. Why is it a problem?
Saline brine is:
1. Environmentally harmful
2. Heavily regulated
3. Costly to treat and dispose of.

129. What we thought
1. Desalination 2. Oil and gas production
Photo 1: Kay Bailey Hutchison desalination plant Photo 2: a hydraulic fracturing site near
in El Paso Tx. Morgantown Pa.
129

130. What we did:
130

131. What we learned:
1. Desalination 2. Oil and gas production
Photo 1: Kay Bailey Hutchison desalination plant Photo 2: a hydraulic fracturing site near
in El Paso Tx. Morgantown Pa.

132. Key Partners Key Activities Value Customer Customer
-R & D Propositions Relationships Segments
-Manufacturers -Engineering -Turns waste cost -Service -Inland and coastal
-Utilities customization into revenue -Customization desalination plants
-Regulators -Decreased input -Link to value add -Industrial brine
-Learn regulatory
-Utility Commissions costs / volatility in industrial producers
landscape
-Quiet electricity ecosystem -Hydrofracking
-Foster relationships
-Inland and coastal on-site -Improve public operations
with stakeholders
desalination plants image
-Hiring & retention
-Industrial brine -Decreased liability -Chemical
producers Key Resources -Better public Channels distributors
-Hydrofracking image -Chemical End Users
-People
operations -Decreased -B2B marketing -Chemical Producers
-Intellectual
permitting time -Service
property
-Chemical agreements
-CO2 sequestration -Licensing
distributors -Brand -Utilities
-Energy efficiency arrangements
-Chemical Producers -Relationships with -Fuel Cell Mfgs
stakeholders and -DOESN’T CAUSE
partners EARTHQUAKES
Cost Structure Revenue Streams
-People -Manufacture / Capital -Royalties from licenses -Chemical sales
-R & D -Operation and -Service contracts -Electricity sales
–Prototyping maintenance -Engineering consulting -REC sales
-Legal fees -Sales and Marketing fees -Brine treatment
(IP, Licensing, Regulatory) -Strategic Partnerships contracts

133. Key Partners Key Activities Value Customer Customer
-R & D Propositions Relationships Segments
-Manufacturers -Engineering -Turns waste cost -Service -Water Treatment
-Membrane Mfgs customization into revenue -Customization for Hydrofracking
-Utilities -Decreased -Link to value add (Especially
-Know regulatory Produced Water)
-Regulators disposal costs in industrial
landscape -Inlandand coastal
-Engineering firms -Decreased input ecosystem
-Foster relationships desalination plants
-Inland and coastal with stakeholders costs / volatility -Improve public
-Quiet electricity image -Industrial brine
desalination plants -Hiring & retention
on-site producers
-Industrial brine
producers Key Resources -Decreased liability Channels
- Electric Utilities (for
-Hydrofracking -People -Better public
-B2B marketing energy efficiency
operations -Intellectual image FOR
-Possibly investments)
-Chem. distributors property CLIENTS
-Decreased distributors/
-Chemical Producers -Chemical
permitting time ? conferences
-Brand distributors
-Service
-Relationships with -Chemical End Users
-Other frac water -DOESN’T CAUSE agreements
stakeholders and -Chemical Producers
treatment startups partners EARTHQUAKES -Licensing
arrangements
Cost Structure Revenue Streams
-People -Manufacture / Capital -Royalties from licenses -Chemical sales
-R & D & Prototyping -Operation and -Service contracts -Electricity sales
-Legal fees maintenance -Strategic Partnerships -REC sales
(IP, Licensing, Regulatory) -Sales and Marketing -Brine treatment
contracts

134. Traditional methods to dispose of saline brine include:
Deep well injection Evaporation Pits
Photo 4: a small deep well injection rig Photo 5 : a typical wastewater evaporation pit

135. Thought: Problem in the Marcellus
Texas:~50,000 Class II Disposal Wells (at least
80% for enhanced recovery)
Pennsylvania: 8 Class II Disposal Wells

136. Price for water treatment ~60x higher than we
thought!

138. Service
Well Owner Providers
(Fracking, O
nsite
recycling) Engineering
Firms
Regulators
(Water
Rights, Dispos Primary
al, Permitting) Treatment
Facility
Technology
Developers /
Vendors Secondary
Treatment
Contractor
Disposal
Companies

139. Disposal
Produced Dilution with
Water Freshwater
Reuse to
Frac Another
Well
Primary
How high can
Treatment they go?
This is where we Tertiary
fit in Treatment
Current state of Discharge
the art are
evaporators and Must be
crystallizers drinking water
quality

140. Drilling Flowback Produced
Water Water Water
Water from drilling First 30 days of Produced over
muds used to drill production well’s operating
well life (4-30 years)
Medium TDS
High TSS Very high TDS
~5-20 % of injected (usually 100,000
Small ppm or higher)
quantity, weird
stuff in it ~5-20 % of injected

141. Class II Wells Primary and
Tertiary
Treatment
Cost of 0.50-1.50 10.00-12.00 5.00-6.00
Disposal
($/bbl)
Transport 4.00-16.00 2.00-4.00 1.00-4.00
Cost ($/bbl)
Total 4.50-17.50 12.00-16.00 6.00-10.00
($/bbl)

142. “Moe! don’t throw out that brine!”

143. North American
Produced Water Market
TAM: $5 bn/yr
SAM: $3 bn
Target: $0.5 bn
Our projections:
~ $21 million/year revenues from one
10,000 barrel per day plant
<5% of current treatment and disposal in PA

144. Disposal
Produced Dilution with
Water Freshwater
Reuse to
Frac Another
Well
Primary
Treatment
Tertiary
= ~$1/bbl/hr Treatment
Discharge

145. Salt
Processing
Treatment
Storage
Drop-Off

146. Risks
1. Market risk: increasing reuse lowers disposal rate
2. Technology risk
3. Unable to sell into chemical markets
146

147. Key Partners Key Activities Value Customer Customer
-R & D Propositions Relationships Segments
-Manufacturers -Engineering -Turns waste cost into -Water Treatment
-Integrators customization revenue -Make it easy for for Oil and Gas
-Membrane Mfgs -Decreased them to get rid of (Especially
-Know regulatory disposal costs and their waste Produced Water)
-Engineering firms
landscape volume -Brand = good PR -Service Providers
-Foster relationships -Decreased for Oil and Gas
-Hydrofracking
with stakeholders transport costs -Oil and Gas
operations
-Hiring & retention -Decreased input Owner/Operators
-Service providers
for oil and gas costs / volatility and
Key Resources Channels
industry freshwater volume
-Oil and Gas -People -Quiet electricity
Owner/Operators -Intellectual -B2B marketing -Chemical
property -Better public -Possibly distributors
-Other frac water image for clients distributors/ -Chemical End Users
treatment startups -Brand -Decreased conferences -Chemical Producers
-Relationships with permitting time -Oil &gas well
-Environmental stakeholders and service providers/
Groups/Regulators -Doesn’t Cause
partners Earthquakes manufacturers
Cost Structure Revenue Streams
-People -Manufacture / Capital -Royalties from licenses -Chemical sales
-R & D & Prototyping -Operation and -Service contracts -Electricity sales
-Legal fees maintenance -Strategic Partnerships -REC sales
(IP, Licensing, Regulatory) -Sales and Marketing -Brine treatment
contracts

148. Key Partners Key Activities Value Customer Customer
-R & D Propositions Relationships Segments
- Produced Water -Engineering -Service Providers
-Decreased
Treatment customization -Make it easy for for Oil and Gas
disposal costs and
companies them to get rid of Water Treatment
volume
-Know regulatory their waste for Oil and Gas
-Service providers -Decreased
landscape -Brand = good PR (Especially
for oil and gas transport costs
-Foster relationships Produced Water)
industry -Valuable
with stakeholders -Oil and Gas
-Oil and Gas Coproducts
-Hiring & retention Owner/Operators
Owner/Operators -Quiet electricity
RESEACH ARMS Key Resources Channels
-People
-Manufacturers -Intellectual -Better public -Chemical -Chemical
-Membrane Mfgs property image for clients Distributors distributors
-Engineering firms -Decreased -Oil &gas well -Chemical End Users
-Brand permitting time service providers -Chemical Producers
-Relationships with -Doesn’t Cause and water
-Environmental stakeholders and Earthquakes treatment
Groups/Regulators partners companies
Cost Structure Revenue Streams
-People -Manufacture / Capital -Royalties from licenses -Chemical sales
-R & D & Prototyping -Operation and -Service contracts -Electricity sales
-Legal fees maintenance -Strategic Partnerships -REC sales
(IP, Licensing, Regulatory) -Sales and Marketing -Brine treatment
148
contracts

149. Why Do We Do This?

151. Additional Resources
• I-Corps class summary:
http://steveblank.com/2012/03/26/the-national-science-
foundation-innovation-corps-what-america-does-best/
• I-Corps team presentations:
http://www.slideshare.net/sblank/tagged/i-corps
• Resources for startups: http://steveblank.com/tools-and-
blogs-for-entrepreneurs/
• Books for startups: http://steveblank.com/books-for-
startups/
• Additional resources: http://steveblank.com/slides/

152. The Lean LaunchPad
Lecture 2
Value Proposition
Version 6/22/12

153. Value Proposition
What Are You Building and For Who?

154. Value Proposition
What Are You Building and For Who?

155. © 2012 Steve Blank

156. Product/Market
Fit

157. The Value Proposition
Gain Creators
Products
&Services
MVP
Pain Killers

158. Pain = Customer Problem
Gain = Customer Solution

159. The Customer Segment
Gains
Persona
• Jobs
/Archetyp
• Problem or
Need e
Pains
Market Type

160. Gain Creators
Gains
Products
&Services MVP Persona
• Jobs
/Archetyp
• Problem
or Need e
Pain Pains
Killers
Product/Market
Fit

161. Product/Services

162. Value Proposition - Products
• Which are part of your value proposition?
– (e.g. manufactured goods, commodities, produce, ...)
• Which intangible products are part?
– (e.g. copyrights, licenses, ...)
• Which financial products?
– (e.g. financial guarantees, insurance policies, ...)
• Which digital products?
– (e.g. mp3 files, e-books, ...)

163. Value Proposition - Services
• Which core services are part of your value proposition?
– (e.g. consulting, a haircut, investment advice, ...)
• Which pre-sales or sales services?
– (e.g. help finding the right solution, financing, free delivery service, ...)
• Which after-sales services?
– (e.g. free maintenance, disposal, ...)

164. Pain Killers
Reduce or eliminate wasted
time, costs, negative emotions, risks - during
and after getting the job done

165. Pain Killers - Hypotheses
• Produce savings?
– (e.g. time, money, or efforts, …)
• Make your customers feel better?
– (e.g. kills frustrations, annoyances, things that give them a headache, ...)
• Fix underperforming solutions?
– (e.g. new features, better performance, better quality, ...)
• Ends difficulties and challenges customers encounter?
– (e.g. make things easier, helping them get done, eliminate resistance, ...)
• wipe out negative social consequences?
– (e.g. loss of face, power, trust, or status, ...)...
• Eliminate risks
– (e.g. financial, social, technical risks, or what could go awfully wrong, ...)

166. Pain Killer – Is it a Problem or Need?
• Are you solving a Problem?
• Are you fulfilling a Need?
• For who?
• How do you know?

167. Pain Killer - Ranking
• Rank each pain your products and services kill according
to their intensity for the customer.
• Is it very intense or very light?
• For each pain indicate the frequency at which it occurs

168. Gain Creators
How do they create benefits the customer
expects, desires or is surprised by, including
functional utility, social gains, positive
emotions, and cost savings?

169. Gain Creators- Hypotheses
• Create savings that make your customer happy?
– (e.g. in terms of time, money and effort, ...)
• Produce expected or better than expected outcomes?
– (e.g. better quality level, more of something, less of something, ...)
• Copy or outperform current solutions that delight
customer?
– (e.g. regarding specific features, performance, quality, ...)
• Make your customer‟s job or life easier?
– (flatter learning curve, usability, accessibility, more services, lower cost of
ownership, ...)
• Create positive consequences that customer desires?
– (makes them look good, produces an increase in power, status, ...).

170. Gain Creator- Ranking
• Rank each gain your products and services create
according to its relevance to the customer.
• Is it substantial or insignificant?
• For each gain indicate the frequency at which it occurs.

171. Minimum Viable Product

172. Define Minimum Viable Product – Physical
• First, tests your understanding of the problem (pain)
• Next tests your understanding of the solution (gain)
– Proves that it solves a core problem for customers
• The minimum set of features needed to learn from
earlyvangelists
- Interviews, demos, prototypes, etc
- Lots of eyeball contact

173. Define the Minimum Viable Product –
Web/Mobile
• NOW build a “low fidelity” app for customer feedback
– tests your understanding of the problem
• LATER build a “high fidelity” app tests your
understanding of the solution
– Proves that it solves a core problem for customers
– The minimum set of features needed to learn from
earlyvangelists
- Avoid building products nobody wants
- Maximize the learning per time spent

174. The Art of the MVP
• A MVP is not a minimal product
• “But my customers don‟t know what they want!”
• At what point of “I don‟t get it!” will I declare defeat?

175. Things to Consider

176. Value Proposition – Common Mistakes
• It‟s just a feature of someone else‟s product
• It‟s a “nice to have” instead of a “got to have”
• Not enough customers care

177. Questions for Value Proposition
• Competition: What do customers do today?
• Technology / Market Insight: Why is the problem
so hard to solve?
• Market Size: How big is this problem?
• Product: How do you do it?

178. Key Questions for Value Prop
• Problem Statement: What is the problem?
• Ecosystem: For whom is this relevant?
• Competition: What do customers do today?
• Technology / Market Insight: Why is the problem
so hard to solve?
• Market Size: How big is this problem?
• Product: How do you do it?

179. Technical Versus Market Insight

180. Technology and Market Insight
Technology Insight Market Insight
• Moore‟s Law  Value chain disruption
• New scientific  Deregulation
discoveries  Changes in how
• Typically applies to people work, live and
hardware, clean interact and what they
techand biotech expect

181. Examples of Technical Insight
• Topological analysis
enables highly dimensional
data to be analyzed without
predetermining number of
feature sets
 Mass produced components
can be used to create a
miniaturized fluorescence
microscope

182. Examples of Market Insight
• People want to play more involved
games than what is currently offered
• Facebook can be the distribution for
such games
 Masses of people are more likely to micro-
blog than blog
 The non-symmetric relationships will allow
companies and individuals to self-promote
and will impact distribution
 European car sharing sensibilities could be
adopted in North America
 People, particularly in urban
environments, no longer wanted to own
cars but wanted to have flexibility.

183. Types of Value Propositions
Comes from Technical Insight Comes from Market Insight
More Efficient
Lower Better
cost Better
Smaller Distribution
Bundling
Simpler
Faster
Better
Branding

184. Insight
• All of you are starting with technical insight
• All of you will get out of the building and get data
• A few of view will get market insight

185. Examples

186. Value proposition
Problem Solution Features of value
proposition
• Non- • Sustainable, bio-based • Bi-functional molecules
renewable, petroleum replacement • Flexibility in chain length
derived feedstock for • Higher performance • Flexibility in branching
surfactant, lubricant • Improved cold
industry temperature tolerance of
detergents, lubricants

187. Hand weed control is a Nightmare
Crews of 100s needed
Labor getting harder to get
Back-breaking task
2-3 weedings per crop
Food contamination risk
$250-1,000 per acre
Confidential

188. Circulating Tumor Cells (CTCs): Initial Idea
Circulating tumor cells Oncologists & Pathologists
Cancer cells that have Does my patient have any
detached from the CTCs?
tumor and are How aggressive are they?
circulating in the blood
stream
Capture and grow CTCs
Video technology to characterize aggressiveness
188 188

189. The value proposition epiphany: CanScan is a
cell culture company!
189 189

190. We are unique in our ability to culture CTCs
Technology Capability
Company Product Technology Channel
Isolate Count Analyze Culture
Parsortix Filter  Kits
CellSearch Antibody  Kits
Vita-Assays Substrate  Kits
Mvs360 Antibody  Device
OncoCEE Microfluidics   CLIA labs
LiquidBiopsy Antibody   CLIA labs
ISET device Filter   Device
On-Q-ITY
chip
Microfluidics    Device
ApoStreamTM
Technology
Microfluidics    Device
- Substrate     CLIA?
*This is an abbreviated list
190 190
Class 8 - Update 3.19.2012

191. Cell culture value proposition
Identify and
enumerate CTCs
Characterize
growth potential
Culture Test
Chemotherapies
CTCs
Test CTCs for
biomarkers
191 191

192. Disposal
Produced Dilution with
Water Freshwater
Reuse to
Frac Another
Well
Primary
How high can
Treatment they go?
This is where we Tertiary
fit in Treatment
Current state of Discharge
the art are
evaporators and Must be
crystallizers drinking water
quality

195. The Problem & Our Solution
De-mineralization
X
Problem: No products that
reverses demineralization Our solution:
effectively Remineralization peptides
that restore lost mineral

196. The Lean LaunchPad
Lecture 3
Customer Segments
Who Are Your Customers?
What Job Do They Want You to Do?
6/22/12

197. Customer Segments
Who Are They?
Why Would They Buy?

198. © 2012 Steve Blank

199. Product/Market
Fit

200. The Value Proposition
Gain Creators
Products
&Services
MVP
Pain Killers

201. Pain = Customer Problem
Gain = Customer Solution

202. The Customer Segment
Gains
Persona
• Jobs
/Archetyp
• Problem or
Need e
Pains
Market Type

203. Gain Creators
Gains
Products
&Services MVP Persona
• Jobs
/Archetyp
• Problem
or Need e
Pain Pains
Killers
Product/Market
Fit

204. Jobs to Be Done
Problems/Needs
What is the customer segment trying to get done?
Is it a problem or a need?

205. Customer Segments – Jobs/Needs
• What functional or social jobs are getting done?
– (e.g. perform or complete a specific task, solve a specific problem or trying
to look good, gain power or status, ...)
• What emotional jobs?
– (e.g. esthetics, feel good, security, ...)
• What basic needs are you helping your customer satisfy?
– (e.g. entertainment, communication, sex, ...)

206. Buyer/Co-Creator/Transferor
• Are they a buyers
– (e.g. comparing offers, deciding, buying, taking delivery of a product or
service, ...)
• Are they co-creators
– (e.g. co-designing with solution providers, contributing value to the
solution, ...)
• Are they transferors'
– (how customers dispose of a product, transfer it to others, or resell, ...)

207. Customer Segment Jobs - Rank
• Rank each job according to its significance to the
customer.
• Is it crucial or is it trivial?
• For each job indicate the frequency at which it occurs.
• Outline in which specific context a job is done, because
that may impose constraints or limitations
– (e.g. while driving, outside, ...)

208. Customer Pains
undesired costs and situations, risks, negative
emotions

209. Customer Segments – Pains
• What do your customers find too costly?
– (e.g. takes a lot of time, costs too much, requires substantial efforts, ...)
• How are current solutions underperforming?
– (e.g. lack of features, performance, malfunctioning, ...)
• What are the customers main difficulties and challenges?
– (difficulties getting things done, resistance, ...)
• What‟s keeping your customer awake at night?
– (e.g. big issues, concerns, worries, ...)

210. Customer Segments – Pains
• What barriers are keeping customers from adopting?
– (e.g. upfront investment costs, learning curve, resistance to change, ...)
• What makes your customers feel bad?
– (e.g. frustrations, annoyances, things that give them a headache, ...)
• What risks do customers fear?
– (e.g. financial, social, technical risks, or what could go awfully wrong, ...

211. Customer Gains
benefits the customer expects, desires or is
surprised by. includes functional utility, social
gains, positive emotions, and cost savings

212. Customer Segments – Gains
• Which savings would make your customer happy?
– (e.g. in terms of time, money and effort, ...)
• What outcomes do they expect and what would go beyond
their expectations?
– (e.g. quality level, more of something, less of something, ...)
• How do current solutions delight your customer?
– (e.g. specific features, performance, quality, ...)
• What would make your customer‟s job or life easier?
– (e.g. flatter learning curve, more services, lower cost of ownership, ...)

213. Customer Segments – Gains
• What positive social consequences do they desire?
– (e.g. makes them look good, increase in power, status, ...)
• What are customers looking for?
– (e.g. good design, guarantees, specific or more features, ...)
• What do customers dream about?
– (e.g. big achievements, big reliefs, ...)
• How does your customer measure success and failure?
– (e.g. performance, cost, ...)
• What would increase the likelihood of adopting a solution?
– (e.g. lower cost, less investments, lower risk, better quality, performance,
design, ...)

214. Customer Persona/Archetype

215. Define Customer Archetype/Persona
• Who are they?
– Position / title / age / sex / role
• How do they buy?
– Discretionary budget (name of budget and amount)
• What matters to them?
– What motivates them?
• Who influences them?
– What do they read/who do they listen to?
• Draw a Day in the Life of the customer

216. Market Type

217. Type of Market Changes Everything
Existing Resegmented New Clone
Market Market Market Market