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Customer Development @ Aalto SOS 2012

Presentation slides and background material for customer development kick-off session at Aalto Summer of Startups 2012 program on June 11th, 2012. Presentors and coaches: Juha Mattsson of Symbioosi and Heikki Leskelä of Bluebiiit

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Customer Development @ Aalto SOS 2012

  1. 1. salesgeneration new perspective Aalto Summer of Startups 2012 Customer Development Basics Dr. Juha Mattsson June 11th, 2012 CEO & Co-founder, Symbioosi
  2. 2. 2 June 15th, 2012 (c) Symbioosi Partners, Juha Mattsson
  3. 3. The Lean Startup Model Problem Solution Core Key idea assumptions Customer Product Architecture Positioning Features Acquisition Feedback Customer Product Development Development Problem/Solution Validation (Source: Eric Ries, The Lean Startup, 2011)3 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  4. 4. Things to learn from startup methodology  Good ideas are “dime a dozen”, execution is the key  Acting like an entrepreneur: – Investing your personal money on a high-risk venture – Sacrificing your scarce time in front of more secure options – Obtain just enough funding (and dilute your ownership) as necessary to execute to next phase  Managing a chaos – Fast-moving business environments – Zero existing structures (organization, customers, markets, brand, etc.)  Fighting natural psychological tendencies to – Believing in your own ideas and assumptions – One-pont-estimation  The fail fast -principle!4 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  5. 5. Lean Startups  Lean startups combine fast, iterative product development methodologies with customer development principles – Origins in software business where open source platforms and free software have enabled a new ”lean” approach to business creation – Agile development methodologies – Rapid, repetitive customer-centric iteration of core soltion  Customer development team works on constantly testing core assumptions – Who is the customer – What need/problem to solve – What the solution should be  The Product development team actually builds the solution5 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  6. 6. (Source: Presentation by Eric Ries)6 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  7. 7. A few notes about the Customer Development approach  The customer development process iterates on – core business assumptions (customer-problem-solution) – product functionality & features – assumptions of customer acquisition and conversion  Tasks – To validate core hypotheses (customer-problem-solution) – To develop a Minimum Viable Product – To achieve product-market fit – To produce a development and marketing/sales roadmap for building scale  Two desired outcomes from the process 1. A thriving, successful company (build organization and scale the business) 2. Realization that there is no real market or the market is insufficient (stop and change direction)7 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  8. 8. The Customer Development Framework Pivot Customer Customer Customer Company discovery validation creation building Problem- Product- solution fit market fit Scale organization Business Scale Proposed MVP model execution Scale (Steve Blank) Sales & Proposed operations marketing Funnel(s) roadmap A product solves a The market is The business is Operational processes problem for an saleable and large scalable through a and a structured identifiable group of enough that a viable repeatable marketing organization is built to users business can be built and sales roadmap support scale8 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  9. 9. Essential Concepts in Customer Development  Early Adopters / Evangelists  Segmentation  Market type  Non-traditional business models  Positioning  Product-Market Fit  Minimum Viable Product (MVP)  Pivot  Getting out of the building9 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  10. 10. The Business Model Canvas10 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  11. 11. MVP Develops in Stages Concept Product-market Eval Product-market Fit MPV #1 MVP #2 MVP #3 PPC campaign Product drawings Prototype Landing page Detailed specs Functional output Feature/benefit Customer description, ”More Product Drawings, Field pilot Interaction Info” –call for exact specs action Locate strategic Get market insight, partners, obtain Revenue, customer Objective identify early seed funding, get validation, capital adopters paid beta- investment customers11 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  12. 12. Early Adopters, Evangelists, Lead Users  Passionate, early users of a new innovation (technology/process/business model) who understand its value before mainstream markets  Early adopters are important, because – They seek out new solutions & technology to solve their problems – not just for the sake of playing around with newest technology – Don’t rely on references from others to make buying decisions (though are incluenced by other early adopters) – Are often willing to help you and want you to be successful! Technology adoption cycle Lead Users Innovators Early Adopters Early Majority Late Majority Laggards12 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  13. 13. Segmentation  The practice of breaking down a larger market into smaller identifiable groups of users that – share a specific need/problem – can be approached by a common marketing/sales program – have access to each other and use one other as a trusted reference  Benefits of segmentation – Focus: validating specific Customer-Problem-Solution (CPS) -hypotheses – Prioritization: allocating scarce resources effectively – Systematization: executing effective sales&marketing campaings targeted at specific segments – Positioning: attaining a market leader position in a specific user/customer base – Phasing: generating a series of meaningful steps for scaling up the business13 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  14. 14. Market Type Three relevant ways of thinking your markets: 1. A new product to a new market 2. A new product to an existing market 3. Re-segmenting an existing market ”There is a tendency of entrepreneurs to believe that they have a new product for a new market, though this is rarely the case”  Thus, most likely, you are re-segmenting an existing market. Important – Your customer’s view of your market is more important than yours – You can choose your market type!14 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  15. 15. Non-Traditional business models  Business models that do not sell a product to a customer directly for a set amount of money  Freemium business models: offering multiple account levels differentiated on product functionality and price – Example: almost all SAAS based corporate productivity tools such as, Basecamp, LinkedIn, etc.  Free business models: offering something for free to a specific group of users while the user bases itself enables alternative revenue models – E.g. Google, Facebook  Pre-revenue business models: giving the basic product initially out for free to grow user base and criticall mass. Introducing payments as product/category/brand gets established – E.g., Shazam, Skype  Many related options and concepts: gamification, crowdsourcing, open-source, customization/consultation, service/maintenance, donations15 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  16. 16. Positioning  The act of placing your product/brand within a market landscape, in your audience’s mind  Key idea: to make your target customers to understand what benefit they willl receive from you and why you are better than anyone else  Important: positioning may vary by audience (media, investors, opinion leaders, early adopters, mainstream customers, etc.)16 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  17. 17. Product-Market Fit  Product-Marketg Fit is reached when a product shows strong demand by passionate users representing a sizeable market  Qualifiers – The customer is willing to pay for the product – The cost of acquiring a customer is less than what they are willing to pay – There is evidence that indicates the underlying market is large enough ”Achieving Product-Market fit requires at least 40% of users saying they would be very disappointed wouthout the product.” (Sean Ellis)17 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  18. 18. Minimum Viable Product (MVP)  Key idea: A product with the fewest number of features needed to achieve a specific need-satisfying objecive, and users are willing to pay in terms of some scarce resource  The aim is to produce a product version with minimum effort and features that allows maximum learning about the behavior of core customers – Conversely: minimize damage & lost efforts if this version of the product doesn’t ultimately work out, i.e. fit the market & customer need  Important – It is central to know which is the smallest feature set customers are willing to pay for in the first actual release – There are typically different MVP versions along the development cycle – The MVP is usually centered around a specific problem and solution, a ”core use case” – Scarce resource = time, money, attention, etc. that represents a sacrifice from the customer’s part18 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  19. 19. ”Getting out of the Pivot building”  Key idea: change some element(s) of  Key idea: Don’t accept your your customer-problem-solution assumptions and visions but get out of hypothesis or business model, based the building and talk face-to-face to on learning from customers living and breathing customers.  Fail fast!  Analytics, surveys, other fancy user- facing testing tools are, at best, complementary to concrete customer development and getting out of the building19 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  20. 20. The 8 Steps to Customer Discovery 1. Document C-P-S hypotheses 2. Brainstorm business model hypotheses 3. Find prospects to talk to 4. Reach out to prospects 5. Engaging prospects 6. Phase gate I: compile, measure, test 7. Problem-solution fit / MVP testing 8. Phase gate II: compile, measure, test20 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  21. 21. Task 1: Get together and choose a NPD idea  Get together with your group – Short introductions, if needed – Choose a project manager (who’ll keep everything together) – Decide on other roles & responsibilities if you find it useful (”PPT wizard”, ”idea owner”, ”industry expert”, etc.)  Choose a NPD idea/template to work with – This can be an actual idea/context from one of the participants’ organizations! – Or a ”fictional” (but realistic enough) concept21 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  22. 22. Task 2: The whiteboard excercise 1. Draw a map of your ecosystem – Entities involved (users, customers, channel partners, technical partners, strategic partners, advertisers, customers’ customers, etc.) – Value flows (either direct or indirect) – Money flows – Product distribution (assumptions of how your product moves through your channels to reach end users) 2. Define a value proposition for each partner – What benefit will each entity in the ecosystem gain by participating? – What will they need to sacrifice/pay? – Transfer each value proposition to a C-P-S hypothesis, if possible22 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  23. 23. Task 2: The whiteboard excercise 3. Sketch a final MVP – Also intermediate MVP’s if necessary/relevant – Think of what you need to provide to each entity with whom you have a direct relationship, in order to achieve the value identified above? – Currency: what the user/buyer ”pays” for using the MVP – MPV metric: what are you measuring to determine viability – Value determinants: what features and functionality do the users/buyers require at minimum to pay their currency? 4. Evaluate risks and critical success factors – Short term vs. long term risks, their implications, and how to account for – How the ecosystem needs to change/remain in order for your business to work? – Critical dependencies and players? 5. Draw a value path – That describes how the MVP’s and business model develops step-by-step, constantly increasing the value generated to the ecosystem23 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  24. 24. Step 3: Design an action plan for the 8 steps to Customer Discovery 1. Document C-P-S hypotheses 2. Brainstorm business model hypotheses 3. Find prospects to talk to 4. Reach out to prospects 5. Engaging prospects 6. Phase gate I: compile, measure, test 7. Problem-solution fit / MVP testing 8. Phase gate II: compile, measure, test24 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  25. 25. Additional readings Steven Blank Cooper & Vlaskovits Eric Ries 2005 2010 201125 11.6.2012 Aalto SOS 2012 // Mattsson, Leskelä
  26. 26. Thank you! Our new book: Best Cases in B2B Sales Management Mattsson & Parvinen, 2011 Juha Mattsson www.symbioosi.fi26 June 15th, 2012 (c) Symbioosi Partners, Juha Mattsson