This document outlines the key concepts taught in a class on business models and customer development. It discusses moving from traditional functional organizations and waterfall development to having founders run customer development teams and use agile development. The business model canvas is used to articulate hypotheses about the business model and keep score of customer development progress. Customer development involves testing problems before solutions through building minimum viable products and pivoting if needed based on customer feedback.
16. Business Schools
• Made the American Century
• Embraced entrepreneurship
– Myles Mace HBS 1947, Stanford 1953
– But as an activity you execute
• Now embracing search
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18. Why?
Startups are Not Smaller Versions of a
Large Company
Search versus Execution
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19. Startups versus existing companies
• That startups begin with a series of unknowns (mostly)
– They Search
• That existing companies deal with execution of knowns
(mostly)
– They Execute
• The insight is that management tools built to execute do
not work in search
• Early stage ventures need their own tools
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22. What’s A Startup
A temporary organization designed to search for a
repeatable and scalable business model
• This is what the class is about
• It’s a definition filled with action
• Each word has meaning
– Temporary
– Search
– Repeatable
– Scalable
– Business Model
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30. Business Model versus Business Plan
• We are not saying never to a business plan
• We are saying, “not first”
• Plans are static
• Models are dynamic
• Planning comes before the plan
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33. Tradition – Hire Marketing
Concept/
Seed Round
Product
Dev.
Alpha/Beta
Test
Launch/
1st Ship
- Create Marcom
Materials
- Create Positioning
- Hire PR Agency
- Early Buzz
- Create Demand
- Launch Event
- “Branding”
Marketing
34. Tradition – Hire Sales
Concept/
Seed Round
Product
Dev.
Alpha/Beta
Test
Launch/
1st Ship
- Create Marcom
Materials
- Create Positioning
- Hire PR Agency
- Early Buzz
- Create Demand
- Launch Event
- “Branding”
• Build Sales
Organization
Marketing
Sales • Hire Sales VP
• Hire 1st Sales Staff
35. Tradition – Hire Bus Development
Concept Product
Dev.
Alpha/Beta
Test
Launch/
1st Ship
- Create Marcom
Materials
- Create Positioning
- Hire PR Agency
- Early Buzz
- Create Demand
- Launch Event
- “Branding”
• Hire Sales VP
• Pick distribution
Channel
• Build Sales Channel /
Distribution
Marketing
Sales
• Hire First
Bus Dev
• Do deals for FCSBusiness
Development
36. Tradition – Hire Engineering
Concept Product
Dev.
Alpha/Beta
Test
Launch/
1st Ship
- Create Marcom
Materials
- Create Positioning
- Hire PR Agency
- Early Buzz
- Create Demand
- Launch Event
- “Branding”
• Hire Sales VP
• Pick distribution
Channel
• Build Sales Channel /
Distribution
Marketing
Sales
• Hire First
Bus Dev
• Do deals for FCSBusiness
Development
Engineering • Write MRD • Waterfall • Q/A •Tech Pubs
37. Customer Problem: known
Product Features: known
Waterfall / Product Management
Execution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Ries
http://startuplessonslearned.blogspot.com
43. Why?
Customer & Agile Development versus
Product Launch and Waterfall
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44. Customer & Agile Development versus
Product Launch and Waterfall
• Product Launch process assumes hypotheses are facts
• Waterfall development assumes you know:
– the customer problem
– Entire solution
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53. Functional Organizations
• An easy trap for startups
• Large companies have VP’s of Sales, Marketing &
Business Development
• I guess we should too
• Titles are the same, functions are radically different
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55. The Canvas in Class
• Forces students to articulate all 9 parts of a business
model (static)
• Used to keep score of customer development progress
(dynamic)
• Allows visualization of the entrepreneurial process
• 9 boxes provides a convenient tempo for weekly classes
Different from Osterwalder's original intent - strategy
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63. Multiple Customer Segments
• Might have multiple segments of users
• Might have users and payers
• Might have 5 or 6 different customers
– Medical devices have doctors, hospitals, patient, insurance
company, FDA, etc.
• For every customer segment you need:
– Value proposition
– Revenue model
– And may have unique channels, cust relationships, etc.
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85. Canvas Components
• We overview all the 9 boxes in the first lecture
• Subsequent classes detail each of canvas components
• But that’s a sleight of hand
• What we are really doing is getting the students to talk to
100 customers in a quarter
• The class is not about the lectures
• It’s about the work the students do outside the building
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91. Customer Development
• While so far the class looked like an easy business model
canvas class …
• The class is actually all about Customer Development!
• Drawing the canvas hypotheses are easy
• Testing them is really, really hard
• Just like a startup
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96. Test the Problem then the Solution
• Customer development is about hypothesis testing
• It’s why scientists do great in this class
• What are you testing? All the nice, neat assumptions in
the business model canvas
• First, you test basic assumptions
• Then, you test the solution itself
• Customer discovery and validation is a fairly rigorous
process
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100. Build the minimum viable product
• This is easy if you use Agile development
• You build your product iteratively and incrementally
• The goal is feedback, learning, insight, orders, etc. with
the minimum feature set
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104. The Pivot
• A core concept of Customer Development
• In the past a failure to make “the plan” meant a failure of
an individual to execute
• In the past we fixed problems and changed strategies by
firing executives
• Now we first fire the plan
• A pivot is a substantive change in one or more business
model canvas components
• An iteration is a minor change in one or more business
model canvas components
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110. Keeping Score with the Canvas
• A core concept of the class
• Weekly updates of the canvas allow the teaching team to
visually see customer development process
• Visualize the canvas extending in the Z-axis
• That axis represents the customer development process
over time
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