Bob dorf about Customer Development

Business Models and Customer Development:

How to FAIL Less(hint: it’s not just a method for startups!)

Bob Dorfallegedly retired serial entrepreneur, educator

Partner, K&S Ranch Inc.

www.steveblank.combob@kandsranch.com

ME: 7 startups, >20 investments, 3 vests…

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7 IPOs, 6 disasters, Columbia B-School Prof.

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608 pages….500+ startup misteaks

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Most startups fail to scale.

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More startups fail from a lack of customers than from a failure of product

development

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…and passionate customersare damn hard to find!

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Why Most Startups Fail…

Assume Customer Problem: known

Assume Product Features: known

Concept/Seed

Round

Product Dev.

Alpha/Beta Test

Launch/1st Ship

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Startup Enemy #1:

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Wait a minute Bob…We are hardly a Startup!

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I don’t care!You should always be Innovating!Constantly seek customer feedbackAlways challenge your business modelUse the same approach, just not every day

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No Business Plan survives first contact with customers!

…ask Webvan!

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When you’re done…9 best GUESSES

…ask Webvan!

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TRANSLATE: Not a Startup??…a 4-5 day customer

vacation!!

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Where Discovery Begins:Minimum Viable Product

• Google without ads (two years+)• Zappos without any shoes• Diapers.com without diapers

…Fewest possible features to make the point!…When did a powerpoint last get YOU excited?…YOU can use this process to test new ideas

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• Stop selling, start listening• Test your hypotheses• Continuous Discovery• …execute while running your current

business• …isolate the “startup” within your

business

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

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The Pivot

• The heart of Customer Development

• Iteration without crisis

• Fast, agile and opportunistic

Customer

Discovery

Customer

ValidationPivot

Search

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Just a few(of many) Historic Pivots

• Steve Blank: “Page 6”• Perimeter: “there are 9000 of us”• Groupon: the $12billion pivot• Ning

• …and thousands more!28

Pivot Cycle Time Matters

• MVP speeds up cycle time

• Speed of cycle minimizes cash needs

•Customer feedback drives the product!

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

ExecutionSearch

Pivot

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How do you know when Discovery is “done?”

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Key PartnersWho are our key partners/ suppliers

Key ActivitiesWhich key activities does the biz model require

Value PropositionWhat value do we deliver to the customer

Customer RelationshipsWhat type of relationship does each segment require of us

Customer SegmentsFor whom are we creating value

ChannelsThrough which channel does each segment want to be reached

Revenue StreamsHow much is each segment willing to pay and how would they like to pay us this amount

Cost StructureWhat are our cost drivers

Key ResourcesWhich key resources does the biz model require

identify key market segments (geography/application) and customer segments (e.g. operator versus owner)

how many customers in each segment and estimated potential volume for each customer

how do customers make money … key customer pain/gain points in each segment

how are buying decisions made in each segment - id process, hurdles, decision makers

what does an Earlyvangelist look like in each segment

who influences purchases in each segment (trade groups, key resellers, trend watchers)

key distinctive product features & benefits for the target customer segment

total cost of ownership for segment versus alternatives

why will segment buy Durathon versus alternatives (i.e. value proposition)

minimum feature set (i.e. our launch configuration) and ultimate feature set

opportunities to claim IP or trademark / is there freedom to practice

what regulatory/ certification/ transportation/ customs requirements should be met or could be differentiator

which segments can only or best be reached through a channel partner

which channel partners are important to optimize sales in each segment

what are channel partners' requirements and cost to become a proactive sales channel

initial channel partner response to value proposition & customer segments

What are price /performance characteristics of competing technology What is the 2013 price target for 1 MM cells What is the 2015 price target for 10 MM cells what is optimum sales method for each segment (asset sale, lease, pay for performance, etc.)

product positioning/elevator pitch for each segment

Prospect roadmap: how to get face-to-face with right person at prospects in each segment

key competitors in each segment and their market share

key competitors' characteristics & dynamics What outbound marketing/ advertising/

promotion activities are needed support tools required by segment (white

papers, TCO calc., tradeshow) pipeline of leads

x

x

x

X = number of in depth customer data points / data sources used to validate hypothesis

red = low hypothesis confidence yellow = medium hypothesis confidence green = high hypothesis confidence

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Complete regional overview

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Populate life cycle data for performance guarantees

Educate market on metric: $/kWh-day delivered over life of asset

Establish strong partnerships with channel partners

Integrated power system engineering – compatibility for retrofit and optimized system solutions

Financing options for Power services operators

Launch reliability

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Customer Validation

Customer

Discovery

CustomerValidatio

n

Customer Creation

CompanyBuilding

• Repeatable and scalable business model?

• Passionate earlyvangelists?

• Pivot back to Discovery if no customers

Pivot Execution

Search

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ScalableStartup

Large CompanyTransition

Why Startups Aren’t Run By Accountants

Alfred P. Sloan

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ScalableStartup

Large CompanyTransition

Founder of General Motors

Billy Durant

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ScalableStartup

Large CompanyTransition

FIRED by General Motors Board

Billy Durant

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Durant Versus Sloan

• Dies, rich, honored and famous

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Durant Versus Sloan

• Dies, rich, honored and famous• Dies managing a bowling alley

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Durant Versus Sloan

• Dies, rich, honored and famous• Dies managing a bowling alley

Accountant

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Innovators look out!WE are here

ScalableStartup

Large CompanyTransition

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“Get Out of the Building!!!”

bob@kandsranch.comwww.steveblank.com

ON SALE HERE…also in ebook 39