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Commonwealth club 020811
This document discusses strategies for successful startups. It contrasts the traditional approaches used by startups, such as hiring marketing, sales, business development, and engineering teams early on, with a more effective customer-focused approach. Rather than making assumptions about customer needs and developing products without validation, startups should search for a repeatable business model through customer interaction and iteration. The document advocates focusing first on understanding customer segments, value propositions, and revenue streams before scaling operations.
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Commonwealth club 020811
- 1. Successful Strategies forProducts That WinSteve BlankStanford - School of EngineeringU.C. Berkeley - Haas School Of Businesswww.steveblank.comTwitter: sgblank
- 2. A Few ShortStories
- 3. There’s Something HappeningHere, What It Is Ain’t Exactly Clear
- 4.
- 5. High Cost toFirst ProductStartup Constraints
- 6. High Cost toFirst ProductLong Time to First ProductStartup Constraints
- 7. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsSlow Customer Adoption
- 8. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsSlow Customer AdoptionHigh Startup Failure Rate
- 9. High Cost toFirst ProductLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 10. High Cost toFirst ProductInnovation Limited to a Few RegionsLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 11. High Cost toFirst ProductInnovation Limited to a Few RegionsLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 12. There’s Something HappeningHere, What It Is Ain’t Exactly Clear
- 13.
- 14. Low Cost to1st ProductEntrepreneurial Explosion
- 15. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial Explosion
- 16. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer Adoption
- 17. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer AdoptionLower Startup Failure Rate
- 18. Low Cost toFirst ProductShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 19. Low Cost toFirst ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 20. Low Cost toFirst ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionThis talkLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 21. Not All StartupsAre Equal
- 22. Small BusinessStartupSmall BusinessStartupsServe known customer with known product
- 23. Feed the familySmallBusinessStartupExit Criteria Business Model found- Profitable business Existing team< $1M in revenueSmall Business Startupsknown customer known product
- 24. Feed the familySmallBusinessStartup- Business Model found- Profitable business Existing team< $10M in revenueSmall Business Startups5.7 million small businesses in the U.S. <500 employees
- 25. 99.7% of allcompanies
- 26. ~ 50% oftotal U.S. workershttp://www.sba.gov/advo/stats/sbfaq.pdf
- 27. Large Company SustainingInnovationSustaining InnovationTransitionScalableStartupLarge Company Existing Market / Known customer
- 28. Known product featureneedsLarge Company Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive InnovationNew Market
- 29. New tech, customers,channelsLarge Company Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive InnovationBuild
- 30. Acquire - Talent - Product - Customers - Business
- 31. ScalableStartupLarge CompanyScalable StartupSearchGoalis to solve for: unknown customer and unknown features
- 32. ExecuteSearchScalableStartupLarge CompanyExit CriteriaBusiness model found
- 33. Total AvailableMarket > $500m -$1B
- 34. Can growto $100m/yearScalable Startup
- 35. ScalableStartupLarge CompanyTotal AvailableMarket > $500m
- 36. Company cangrow to $100m/year
- 37. Business modelfound
- 38. Focused onexecution and process
- 39. Typically requires“risk capital”Scalable StartupExecuteSearch In contrast a scalable startup is designed to grow big
- 40. Typically needsrisk capital
- 41. What SiliconValley means when they say “Startup”ScalableStartupLarge CompanyBusiness Model found
- 42. i.e. Product/Marketfit- Repeatable sales model- Managers hiredWhat’s A Startup?A Startup is a temporary organization used to search for a scalable and repeatable business model
- 43. What VC’s Don’tTell You:The TransitionScalableStartupTransitionLarge CompanySearchBuildExecute
- 44. What VC’s Don’tTell You:The Transition – Founders LeaveScalableStartupTransitionLarge CompanyFounders depart
- 45. CEO =Operating Exec
- 46.
- 47.
- 48. Beginning ofscaleScalableStartupTransitionLarge CompanyBusiness Model found
- 49. i.e. Product/Marketfit- Repeatable sales model- Managers hiredWhat’s A Startup?You fail if you stay a startup
- 50. Why Startups AreNot Small Versions of A Large Company
- 51. Startups Search andPivotThe Search for the Business ModelScalableStartupTransitionLarge Company Business Model found by founders customer needs/product features found i.e. Product/Market fit Repeatable sales model- Managers hired
- 52. Startups Search, CompaniesExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found
- 53. Product/Market fit-Repeatable sales model- Managers hired
- 54. Metrics Versus AccountingTheExecution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet
- 55. Cash FlowStatement
- 56. Income StatementMetricsVersus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost
- 57.
- 58. Customer LifetimeValue
- 59. Average SellingPrice/Order Size
- 60. Monthly burnrate
- 61. etc. Traditional Accounting Balance Sheet
- 62. Cash FlowStatement
- 63. Income StatementCustomerValidation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization
- 64.
- 65. Price List/DataSheets
- 66. Revenue PlanCustomerValidation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters
- 67.
- 68. Not yetrepeatable
- 69.
- 70.
- 71. Price List/DataSheets
- 72. Revenue PlanEngineeringVersus Agile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 73.
- 74.
- 75. Tech PubsEngineeringVersus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 76.
- 77.
- 78. Tech PubsAgileDevelopment Continuous Deployment
- 79.
- 80. Self OrganizingTeams
- 81.
- 82. PivotsStartups Model,Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Plandescribes “knowns”
- 83.
- 84.
- 85. business modelStartupsModel, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Model
- 86.
- 87.
- 88.
- 89.
- 90. found byiteration
- 91.
- 92. Known featuresfor line extensions
- 93.
- 94. Known businessmodelWhy Startups Fail
- 95. More startups failfrom a lack of customers than from a failure of product development
- 96. Product Introduction ModelConcept/SeedRoundProduct Dev.Alpha/Beta TestLaunch/1st Ship
- 97. Product Introduction ModelTheLeading Cause of Startup DeathConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship
- 98. Product Introduction Model:TwoImplicit AssumptionsCustomer Problem: knownConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship Product Features: known
- 99. Tradition – HireMarketingConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing
- 100. Tradition – HireSalesConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization
- 101.
- 102. Hire 1st Sales StaffSales
- 103. Tradition – HireBus DevelopmentConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 104.
- 105. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 106. Do dealsfor FCSTradition – Hire EngineeringConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 107.
- 108. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 109. Do dealsfor FCSEngineering Write MRD
- 110.
- 111.
- 112.
- 113.
- 114. No Business Plansurvives first contact with customers
- 115. So Search fora Business Model
- 116. The Business Model:Anycompany can be described in 9 building blocks
- 117. CUSTOMER SEGMENTSwhich customersand users are you serving? which jobs do they really want to get done?
- 118. VALUE PROPOSITIONSwhat areyou offering them? what is that getting done for them? do they care?
- 119. CHANNELShow does eachcustomer segment want to be reached? through which interaction points?
- 120. CUSTOMER RELATIONSHIPSwhat relationshipsare you establishing with each segment? personal? automated? acquisitive? retentive?
- 121. REVENUE STREAMSwhat arecustomers really willing to pay for? how? are you generating transactional or recurring revenues?
- 122. KEY RESOURCESwhich resourcesunderpin your business model? which assets are essential?
- 123. KEY ACTIVITIESwhich activitiesdo you need to perform well in your business model? what is crucial?66
- 124. KEY PARTNERSwhich partnersand suppliers leverage your model? who do you need to rely on?
- 125. COST STRUCTUREwhat isthe resulting cost structure? which key elements drive your costs?
- 126. value propositioncustomer relationshipskeyactivitiescustomer segmentskey partnerscost structurerevenue streamskey resourceschannels69images by JAM
- 127. How Do StartupsSearch For A Business Model? The Search is called Customer Development
- 128. The Implementationis called Agile DevelopmentThe Lean Startup The Search is called Customer Development
- 129. The Implementationis called Agile DevelopmentCustomer Development
- 130. Customer DevelopmentThe founders^GetOut of the Building
- 131. Product DevelopmentConcept/Bus. PlanProductDev.Alpha/Beta TestLaunch/1st Ship+CustomerDevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer DevelopmentPivot
- 132. Customer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationStop selling,start listeningTest your hypothesesContinuous DiscoveryDone by founders
- 133.
- 134.
- 135. CompetitionTurning Hypothesesto Facts
- 136.
- 137.
- 138.
- 139. PayerTest Hypotheses:ChannelTestHypotheses:Demand CreationTest Hypotheses:Problem
- 140.
- 141.
- 142.
- 143.
- 144.
- 145.
- 146. (Problem)Test Hypotheses:ChannelTestHypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 147. Validate BusinessModelTest Hypotheses:Demand CreationTest Hypotheses:Problem
- 148.
- 149.
- 150. PayerAgile DevelopmentTestHypotheses:Product
- 151.
- 152.
- 153.
- 154. (Problem)Customer DevelopmentTeamTest Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 155. Validate BusinessModelTest Hypotheses:Demand CreationTest Hypotheses:Problem
- 156.
- 157.
- 158. PayerAgile DevelopmentTestHypotheses:Product
- 159.
- 160.
- 161.
- 162. (Problem)Customer DevelopmentTeamTest Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 163. Validate BusinessModelThe PivotThe heart of Customer Development
- 164.
- 165. Fast, agile andopportunisticWrap UpStartup are not small versions of large companiesTraditional big company planning tools failStartups are built on hypothesesYou need to test each one of themBusiness Models help you keep scoreCustomer Development is how you test hypotheses
- 166.
- 167. I Write aBlog www.steveblank.com
- 168.
- 169. Atoms or Bits?Speedof Experimentation
- 170. Atoms or Bits?Accessto customers changes dramaticallyThe product can be “bits” or physicalThe sales channel can be “web” or physicalSpeed of experimentation increases and cost decreases when both are bits
- 171. Distribution Channel –Bits or Atoms?
- 172. The Product -Bits vs. Atoms
- 173. Product & Channelare Bits
- 174. Web 2.0 -Product & Channel are Bits
- 175. Product is Bitsbut Channel is People
- 176.
- 177. Physical Products SoldOver the Web
- 178.
- 179. The Factories Maybe in China
- 180. We Still MakeThings that Need Salespeople
- 181.
- 182. Silicon Valley -A Happy AccidentCold war research in microwaves/electronics at StanfordCold war military funding drives Stanford spinouts in microwaves for the defense industry in the 1950’sStanford Engineering Dean encourages startup cultureA Bell Labs researcher starts his semiconductor company next to Stanford in in 1956 which led to…the wave of semiconductor startups in the 1960’s/70’sthe emergence of venture capital as an industrythe personal computer revolution in 1980’sthe rise of the Internet in the 1990’s and finallythe internet commerce applications of the 21st century.