Customer Development - Todd Hooper


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Customer Development - Todd Hooper

  1. 1. Customer development Todd Hooper [email_address]
  2. 2. About me <ul><li>Early case of the entrepreneur bug </li></ul><ul><li>Four startups </li></ul><ul><ul><li>Momentum - CEO and Founder </li></ul></ul><ul><ul><ul><li>Acquired 1996 </li></ul></ul></ul><ul><ul><li>WatchGuard – Vice President </li></ul></ul><ul><ul><ul><li>IPO 1999 </li></ul></ul></ul><ul><ul><li>Trillium Lane Labs – President and Founder </li></ul></ul><ul><ul><ul><li>Acquired 2005 </li></ul></ul></ul><ul><ul><li>Napera Networks – CEO and Founder </li></ul></ul><ul><ul><ul><li>Founded 2006 </li></ul></ul></ul>
  3. 3. Family, religion, friendship ... these are the three demons you must slay if you wish to succeed in business. -- Monty Burns
  4. 4. Three simple rules
  5. 5. Customer development <ul><li>The most critical stage that almost everyone gets wrong </li></ul><ul><li>The only opinions that matter are from users and customers </li></ul><ul><li>“All of the answers lie outside the building” </li></ul><ul><li>Steve Blank </li></ul>
  6. 6.
  7. 7. What is customer development? <ul><li>A process to increase the odds of our startup succeeding </li></ul><ul><li>Synchronized, parallel effort to product development </li></ul><ul><li>Develop for the few, not the many </li></ul><ul><li>Ideal for startups – the exact opposite to large corporate product development </li></ul>
  8. 8. Customer Development <ul><li>Customer Discovery – Achieve Problem/Solution Fit </li></ul><ul><li>Customer Validation – Achieve Product/Market Fit </li></ul><ul><li>Customer Creation – Drive Demand </li></ul><ul><li>Company Building – Scale the Company </li></ul>
  9. 9. Traditional approach
  10. 11. Customer development approach
  11. 12. What kind of startup are we? <ul><li>Entering existing markets </li></ul><ul><ul><li>iPhone, Google </li></ul></ul><ul><li>Creating new markets </li></ul><ul><ul><li>Tivo, Palm </li></ul></ul><ul><li>Resegment existing markets with low price </li></ul><ul><ul><li>Clearwire, WatchGuard </li></ul></ul><ul><li>Resegment existing markets with niche </li></ul><ul><ul><li>Starbucks, In-n-Out Burger </li></ul></ul>
  12. 13. Market Type Characteristics Existing Market Resegmented Market New Market Customers Exist Exist New Customer needs Performance <ul><li>Cost </li></ul><ul><li>Perceived need </li></ul>Simplicity and convenience Performance Better/faster <ul><li>Good enough at low end </li></ul><ul><li>Good enough at high end </li></ul>Improves customers life, ROI or problem/pain Competition Incumbents Incumbents Apathy/other startups Risks Incumbents <ul><li>Incumbents </li></ul><ul><li>Niche strategy fails </li></ul>Market adoption
  13. 14. Customer discovery State your hypothesis 1-2 pages on each item
  14. 15. Stop! <ul><li>Have you got your </li></ul><ul><ul><li>Company incorporated? </li></ul></ul><ul><ul><li>Name? </li></ul></ul><ul><ul><li>One page website? </li></ul></ul><ul><ul><li>Domain? </li></ul></ul><ul><ul><li>Business cards with company name and domain? </li></ul></ul>
  15. 16. Customers <ul><li>Find customers </li></ul><ul><ul><li>Personally speak to at least 30 customers </li></ul></ul><ul><ul><li>Founders are the first sales people </li></ul></ul><ul><li>Validate them </li></ul><ul><ul><li>Are they really a customer? </li></ul></ul><ul><ul><li>What do they consider ‘value’? ROI? </li></ul></ul><ul><ul><li>Work through your ideas with them </li></ul></ul><ul><ul><li>Test your critical assumptions </li></ul></ul><ul><ul><li>“ User stories” </li></ul></ul><ul><li>Develop them </li></ul><ul><ul><li>Get them to engage – prototypes, beta, MVP </li></ul></ul><ul><ul><li>Customer champions </li></ul></ul><ul><ul><li>Ask for the order. Can you sell these people your product? </li></ul></ul>
  16. 17. Customer discovery Test “Problem” Hypothesis
  17. 18. First reality check <ul><li>Entire team </li></ul><ul><li>Present all customer data </li></ul><ul><ul><li>What problems did they have? </li></ul></ul><ul><ul><li>How painful were they? </li></ul></ul><ul><ul><li>How is a customers life with and without our product? </li></ul></ul><ul><ul><li>Would they pay for it? </li></ul></ul><ul><li>How well does our product solve their problem? </li></ul><ul><li>Prioritize features to customer problems </li></ul><ul><li>Review your other hypotheses in light of customer info </li></ul>
  18. 19. Customer discovery Test “Product” Hypothesis
  19. 20. Second reality check <ul><li>Product reactions </li></ul><ul><ul><li>Loved it </li></ul></ul><ul><ul><li>Liked it, but they want this or that feature </li></ul></ul><ul><ul><li>Not very excited </li></ul></ul><ul><ul><li>No need for it </li></ul></ul><ul><li>Remember, you are a startup </li></ul><ul><ul><li>Fast to market – v1.0 is just the first step </li></ul></ul><ul><ul><li>Don’t get trapped in feature wars </li></ul></ul><ul><li>Is this customer willing to become an advisor ? </li></ul>
  20. 21. Customer discovery Verify
  21. 22. What aren’t we going to do? <ul><li>Enumerate needs and wants of all customers </li></ul><ul><li>Make a list of all the generic features and hand that list to developers </li></ul><ul><li>Run focus groups to test customer reactions after we build it </li></ul>
  22. 23. Three rules <ul><li>Get out of the building </li></ul><ul><ul><li>Listen to customers first, then talk </li></ul></ul><ul><li>Test your hypothesis </li></ul><ul><ul><li>Building for a few customers that love or hate your idea is better than building for the indifferent </li></ul></ul><ul><li>Be open to change </li></ul><ul><ul><li>Business and product plans rarely survive first contact with reality </li></ul></ul>
  23. 24. Good luck! [email_address]