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Haas Alum 2010 03 25
The document outlines the customer development process for startups. It defines four steps: customer discovery, customer validation, customer creation, and company building. The early steps involve testing hypotheses about customers' problems and whether the product concept solves them. Later steps focus on growth, such as developing a repeatable sales process and crossing the chasm to mainstream customers. The goal is to search for a scalable business model through customer interaction and pivoting rather than relying only on internal plans.
Haas Alum 2010 03 25
- 1. Improving Your EntrepreneurialOdds: the Customer Development Process Steve Blank
- 2.
- 3. !"#$$%&'()*+((%!,#-,'.(% !"#$"%&' !"#$$%&'()*+((% - Business Model found - Profitable business - Existing team < $10M in revenue • 5.7 million small businesses in the U.S. <500 employees • They employ 99.5% of our workforce
- 4. !,#$#-$+%!,#-,'.% !(#)#*)+' /#-0+% !"#$"%&' 12".#*3% ,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process • In contrast a scalable startup is designed to grow big • It typically needs risk capital • These are what Silicon Valley means when they say “Startup”
- 5. !,#-,'.( % !"#$"%&' !"#$$%&'()*+((% - Business Model found - Profitable business - Existing team < $10M !(#)#*)+' /#-0+% !"#$"%&' 12".#*3% ,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process
- 6. !,#-,'.( % X X X !"#$"%&' !"#$$%&'()*+((% - Business Model found - Profitable business - Existing team < $10M !(#)#*)+' /#-0+% !"#$"%&' 12".#*3% ,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process
- 7. 46+%./#*()01*% !(#)#*)+' 3#$4+' 4-#*()52*% !"#$"%&' 567R' - Founders depart - Professional Mgmt - Process - Beginning of scale
- 8. 76#,8(%9%!,#-,'.:% !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R' - Business Model found - Product/Market fit - Repeatable sales model - Managers hired A Startup is the organization you use to search for your scalable business model
- 9. OUR COMPANY • Device • Software • IP • Services Product • Networks - Technolog y - Customer - Partner • Data • Employees Resources
- 10. OUR COMPANY • EE • System • Mechanica l • Device • Software • Industrial Design • IP • Services Product • Standard • Tooled • Networks • Critical - Technolog Sales & y Components Distribution - Customer - Partner • Data Users • Employees • Knowledge Manufacturing Resources
- 11. OUR COMPANY -' Sales & • Device Distribution • Software • IP -' • Services Users Product -' Design • Networks - Demand Technolog Creation y -' - Customer Components - Partner • Data -' • Employees Manufacturin Resources g -' Customers
- 12. !,#-,'.(%;2*8,%/#(,%<2-+=+-% !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R' - Business Model found - Cash-flow breakeven - Product/Market fit - Profitable - Repeatable sales model - Rapid scale - Managers hired - New Senior Mgmt ~ 150 people You fail if you remain a startup!
- 13. !,#-,'.(%!+#->6?%12".#*)+(%@A+>',+% The Search forthe Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R' - Business Model found - Cash-flow breakeven - Product/Market fit - Profitable - Repeatable sales model - Rapid scale - Managers hired - New Senior Mgmt ~ 150 people
- 14. How Do StartupsSearch For A Business Model?
- 15.
- 16. More startups Failfrom a Lack of Customers than from a Failure of Product Development
- 17. It Started Witha Question If Startups Fail from a Lack of customers not Product Development Failure Then why do we have: • process to manage product development? • no process to manage customer development?
- 18. All We HadWas 30 Years of This Concept/ Product Alpha/Beta Launch/ Seed Round Dev. Test 1st Ship Product Development Model
- 19. It Resulted ina Few Hypotheses • Startups weren’t small versions of large companies • They were about learning and discovery, not execution of a business model • Entrepreneurs and their VC’s were executing on guesses • But the facts were outside the building
- 20. Which Turned IntoA Model Product Development Concept/ Product Alpha/Beta Launch/1st Bus. Plan Dev. Test Ship + Customer Development Customer Customer Customer Company Discovery Validation Creation Building
- 21. Customer Development: KeyIdeas • Parallel process to Product Development • Measurable Checkpoints • Not tied to FCS, but to customer milestones • Notion of Market Types to represent reality • Emphasis is on learning & discovery before execution
- 22. Customer Discovery: Step1 Customer Customer Customer Company Discovery Validation Creation Building • Stop selling, start listening – There are no facts inside your building, so get outside • Test your hypotheses – Two are fundamental: problem and product concept
- 23. Customer Discovery: ExitCriteria • What are your customers top problems? – How much will they pay to solve them • Does your product concept solve them? – Do customers agree? – How much will they pay? • Draw a day-in-the-life of a customer (archetypes) – before & after your product • Draw the org chart of users & buyers
- 24. Customer Validation: Step2 Customer Customer Customer Company Discovery Validation Creation Building Pivot • Develop a repeatable and scalable sales process • Only earlyvangelists are crazy enough to buy • Pivot back to Discovery if no customers
- 25. Customer Validation: ExitCriteria • Can you draw your business model? – Acquisition costs, path to profitability? • Do you have a proven sales roadmap? – Org chart? Influence map? • Do you understand the sales cycle? – ASP, LTV, ROI, etc. • Do you have a set of orders ($’s) validating the roadmap?
- 26. Customer Creation: Step3 Customer Customer Customer Company Discovery Validation Creation Building • Creation comes after proof of sales • Creation is where you “cross the chasm” • It is a strategy not a tactic 3 2
- 27. Customer Creation Big Ideas ! Big Idea 1: Grow customers from few to many ! Big Idea 2: Four Customer Creation activities: " Year One objectives " Positioning " Launch " Demand creation ! Big Idea 3: Creation is different for each of the three types of startups 3 3
- 28. Company Building: Step4 Customer Customer Customer Company Discovery Validation Creation Building • (Re)build your company’s organization & management • Re look at your mission 3 4
- 29. Company Building: BigIdeas ! Big Idea 1: Management needs to change as the company grows " Founders are casualties " Development centric ! " Mission-centric ! " Process-centric ! Big Idea 2: Sales Growth needs to match market type Customer Development in the High-Tech Enterprise October 2008 3 5
- 30. Iteration versus Execution Iteration Execution Customer Customer Customer Company Discovery Validation Creation Building The Search for a Business The Growth of a Business Product/Market Fit
- 31. What They Didn’tTeach You at Haas
- 32. 1'(,2"+-%;+=+$2."+*,%B+-('(% C-2D'>,%E#*#0+"+*,% The Search for the Business Model The Execution of the Business Model !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R' - Delivers MRD’s - Hypothesis Testing - Feature Spec’s - Minimum Feature Set - Competitive Analysis - Pivots Customer Development Product Management
- 33. E+,-)>(%B+-('(%9>>2'*5*0% The Search forthe Business Model The Execution of the Business Model !(#)#*)+' 9$#8:;<68' 567R' !"#$"%&' Startup Metrics Traditional Accounting - Customer Acquisition Cost - Balance Sheet - Viral coefficient - Cash Flow Statement - Customer Lifetime Value - Income Statement - Average Selling Price/Order Size - Monthly burn rate - etc.
- 34. /+#D+-(6).%B+-('(%E#*#0+"+*, % !(#)#*)+' 9$#8:;<68' 567R' !"#$"%&'
- 35. ;'-#*,%B+-('(%!$2#*% !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R'
- 36. &'()*+((%!>622$%B+-('(% @*,-+.-+*+'-(6).%!>622$ % Entrepreneurship School Business School !(#)#*)+' 3#$4+' 9$#8:;<68' !"#$"%&' 567R' - Hypothesis testing - Execution - Experiential - Accounting - Hands-on - Management - Chaotic - Leadership
- 37. Books Available onAmazon and Cafepress Four Steps to the Epiphany Not All Those Who Wander Are Lost Blog www.steveblank.com