Customer Development/Lean Startup 021610 Class 5
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The document discusses customer development for high tech startups. It covers the key phases of customer development: customer discovery, customer validation, customer creation, and company building. During customer discovery, startups should focus on getting out of the building to test their hypotheses about customers, problems, products, distribution, demand creation, market type, and competition. The goal is to validate or invalidate these hypotheses by listening to potential customers and gathering feedback, rather than selling to them.
Customer Development/Lean Startup 021610 Class 5
- 1. Customer Development in the High Tech Enterprise MBA 295-F/EMBA 295-F Customer Discovery: Part 2 Steve Blank sblank@kandsranch.com 1
- 2. Class 5: Agenda ! Logistics/Questions ! CASE: WebVan ! Customer Discovery
- 3. Webvan Case 3
- 4. Customer Discovery Customer Customer Customer Company Discovery Validation Creation Building ! Stop selling, start listening ! Test your hypotheses " Two are fundamental: problem and product concept
- 5. Customer Discovery Customer Phase 3 Phase 4 Discovery Test Verify, Iterate & Product Expand Hypothesis To Validation Phase 1 Phase 2 Author Test Hypothesis Problem Hypothesis
- 6. Customer Discovery Hypotheses! Product Customer Distribution Demand Market Type Competitive Hypothesis & Problem & Pricing Creation Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Test “Problem” Hypothesis! Friendly “Problem” Customer Market First Contacts Presentation Understanding Knowledge Test “Product” Hypothesis! First Reality “Product” Yet More Second Check Presentation Customer Reality Check Visits Verify! Verify the Verify the Verify the Iterate or Product Problem Business Exit Model
- 7. Customer Discovery Hypotheses! T h e i m Product Hypothesis Inside the Building! Customer & Problem Hypothesis Distribution & Pricing Hypothesis Demand Creation Hypothesis Market Type Hypothesis Competitive Hypothesis Test “Problem” Hypothesis! Friendly “Problem” Customer Market First Contacts Presentation Understanding Knowledge Outside the Building! Test “Product” Hypothesis! First Reality “Product” Yet More Second Check Presentation Customer Reality Check Verify! Visits Verify the Verify the Verify the Iterate or Product Problem Business Exit Model
- 8. Customer Discovery - Web Source: ash maurya
- 9. Phase 1: Author Hypothesis Phase 3 Product Phase 4 Iterate & ! One-time writing exercise Concept Expand Testing ! All other time spent in front of customers Phase 1 ! Assumes you’re smart but Phase 2 Test Author guessing Problem Hypothesis Hypothesis
- 10. Customer/Problem Hypotheses ! Types of Customers ! Magnitude of the problem ! Visionaries ! A Day in the Life of a customer ! Organizational impact ! ROI Justification ! Problem Recognition ! Minimum Feature Set
- 11. Distribution/ Pricing Hypotheses ! Distribution Model ! Distribution Diagram ! Sales Cycle/Ramp ! Channel strategy ! Pricing (ASP, LTV) ! Customer Organization Map ! Demand Creation
- 12. Demand Creation Hypotheses ! How do competitors create demand? ! How will you? " Viral " Advertising " PR " Trade shows ! Who are influencers/recommendors? ! Key trade shows? ! Key trends? ! Start assembling advisory board
- 13. Type of Market Hypotheses ! Positioning and Differentiation " Existing Market # The product is the basis of competition " New Market # Creating the market is the basis of competition " Redefine Existing Market # Resegment the existing market is the basis of competition
- 14. Competition Hypotheses ! Who is out there? ! Why are they important? ! How do customers use them today? ! What don’t customers like about them?
- 15. Intermission The Customer Development Team 15
- 16. Traditional organizations and titles Fail Typical Startup CEO VP Engineering VP Marketing VP Sales VP Business Dev ! People equate their titles with their functions " But standard titles describe execution functions " We need new titles = learning & discovery functions
- 17. Customer Development Team Tasks Not Titles Customer Development Driven Startup CEO VP Product Dev Technical Visionary Business Visionary Business Execution In Front of Customers
- 18. End of Intermission 18
- 19. Customer/Problem Hypotheses ! Types of Customers/Archetypes ! Magnitude of the problem ! Visionaries ! A Day in the Life of a customer ! Organizational impact ! ROI Justification ! Problem Recognition ! Minimum Feature Set
- 20. Distribution/ Pricing Hypotheses ! Distribution Model ! Distribution Diagram ! Sales Cycle/Ramp ! Channel strategy ! Pricing (ASP, LTV) ! Customer Organization Map ! Demand Creation
- 21. Demand Creation Hypotheses ! How do competitors create demand? ! How will you? " Dave McClure’s AARGH model ! Who are influencers/recommendors? ! Key trade shows? ! Key trends? ! Start assembling advisory board
- 22. Type of Market Hypotheses ! Positioning and Differentiation " Existing Market # The product is the basis of competition " New Market # Creating the market is the basis of competition " Redefine Existing Market # Resegment the existing market is the basis of competition
- 23. Competition Hypotheses ! Who is out there? ! Why are they important? ! How do customers use them today? ! What don’t customers like about them?
- 24. How Do You Figure Out Your Business Model?
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- 45. Phase 2: Test & Qualify Problem Hypothesis Phase 3 Phase 4 Test Product Iterate & Expand ! Get out of the building Hypothesis ! Test the problem ! Become the customer Phase 1 Phase 2 Author ! Solve a real problem Test Hypothesis Problem Hypothesis
- 46. Test & Qualify Problem: First Contacts ! Build a Rolodex ! Develop “Innovators” list ! Create reference story/sales script ! Schedule Customer Visits
- 47. Test & Qualify Problem: Create Problem Presentation ! Not a Sales Pitch " Test of your understanding of the customers problem ! Problem/Solution – Slide " Problems column 1 " Today’s solution column 2 " Your solution column 3 ! Capture other missing data
- 48. Test & Qualify Problem: Customer Understanding ! Become a Domain Expert ! Understand their “Day-in-the Life” ! Understand their problems/pain ! Get a feel of how this impacts their life/work ! Who has similar products that solve this problem ! How do they learn about new solutions ! Can they be helpful later
- 49. The Big Idea ! What is the problem? ! Who has the problem? ! How important is the problem’s solution to the customer? ! How valuable is the problem’s solution to the customer?
- 50. Test & Qualify Problem: Market Knowledge ! Get a feel for the “lay of the land” ! Adjacent Market players ! Industry Influencers ! Key Analysts ! Attend Conferences/Tradeshows
- 51. Phase 3: Test Product Hypothesis Phase 3 Phase 4 ! First reality check w/ Test Iterate & Expand product development Product Hypothesis ! The product hits the street ! Lots of customer visits Phase 1 Phase 2 Test Hypothesis ! More doses of reality & Qualify Hypothesis
- 52. Test Product Hypothesis: First Reality Check ! Build a Workflow Map of customer " Before and after your product ! Problem scale ! Key insights ! How did the product spec match needs? ! Re-review product feature List ! Why are you different
- 53. Test Product Hypothesis: Product Presentation ! Questionnaire ! Start w/Problem Presentation ! Then describe the Product ! Demo if you have one
- 54. Test Product Hypothesis: Yet More Customer Visits ! Set up More Calls ! Validate Solution ! Validate Product ! Validate Positioning ! Understand Customer and Org. Pain ! Validate Pricing and Budget ! Understand “Whole Product” needs ! Understand Approval Process ! Update potential Advisory Board candidates
- 55. Test Product Hypothesis: Second Reality Check ! Does the product solve a problem? " Serious problem? " For a large scalable market? ! How did the product spec match needs? ! Re-review product Feature List