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 [email protected]

Class 5: Agenda

!  Logistics/Questions !  CASE: WebVan !  Customer Discovery

3

Webvan Case

!  Stop selling, start listening

!  Test your hypotheses "  Two are fundamental: problem and product concept

Customer Discovery

Customer Discovery

Customer Validation

Company Building

Customer Creation

Customer Discovery

Customer Discovery

Phase 1 Author

Hypothesis Phase 2

Test Problem

Hypothesis

Phase 4 Verify, Iterate &

Expand

Phase 3 Test

Product Hypothesis

To Validation

Test “Problem” Hypothesis!

Customer Discovery

Demand Creation

Hypothesis Market Type Hypothesis

Product Hypothesis

Customer & Problem Hypothesis

Distribution & Pricing

Hypothesis Competitive Hypothesis

Hypotheses!

Market Knowledge

Friendly First Contacts

“Problem” Presentation

Customer Understanding

Second Reality Check

First Reality Check

“Product” Presentation

Yet More Customer

Visits

Test “Product” Hypothesis!

Iterate or Exit

Verify the Product

Verify the Problem

Verify the Business

Model

Verify!

Test “Problem” Hypothesis!

Customer Discovery

Demand Creation

Hypothesis

The im

Market Type Hypothesis

Product Hypothesis

Customer & Problem Hypothesis

Distribution & Pricing

Hypothesis Competitive Hypothesis

Hypotheses!

Market Knowledge

Friendly First Contacts

“Problem” Presentation

Customer Understanding

Second Reality Check

First Reality Check

“Product” Presentation

Yet More Customer

Visits

Test “Product” Hypothesis!

Iterate or Exit

Verify the Product

Verify the Problem

Verify the Business

Model

Verify!

Inside the Building!

Outside the Building!

Customer Discovery - Web

Source: ash maurya

Phase 1: Author Hypothesis

!  One-time writing exercise !  All other time spent in

front of customers !  Assumes you’re smart but

guessing Phase 1 Author

Hypothesis

Phase 2 Test

Problem Hypothesis

Phase 4 Iterate & Expand

Phase 3 Product Concept Testing

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

Distribution/ Pricing Hypotheses

!  Distribution Model !  Distribution Diagram !  Sales Cycle/Ramp !  Channel strategy !  Pricing (ASP, LTV) !  Customer Organization Map !  Demand Creation

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

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

Competition Hypotheses

!  Who is out there? !  Why are they important? !  How do customers use them today? !  What don’t customers like about them?

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Intermission

The Customer Development Team

Traditional organizations and titles Fail

CEO

VP Engineering VP Marketing VP Sales VP Business Dev

Typical Startup

!  People equate their titles with their functions "  But standard titles describe execution functions "  We need new titles = learning & discovery functions

Customer Development Team Tasks Not Titles

CEO

VP Product Dev Technical Visionary Business Visionary Business Execution

Customer Development Driven Startup

In Front of Customers

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End of Intermission

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

Distribution/ Pricing Hypotheses

!  Distribution Model !  Distribution Diagram !  Sales Cycle/Ramp !  Channel strategy !  Pricing (ASP, LTV) !  Customer Organization Map !  Demand Creation

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

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

Competition Hypotheses

!  Who is out there? !  Why are they important? !  How do customers use them today? !  What don’t customers like about them?

How Do You Figure Out Your Business Model?

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26 Source: Alexander Osterwalder












38







Phase 2: Test & Qualify Problem

Hypothesis

!  Get out of the building !  Test the problem !  Become the customer !  Solve a real problem Phase 1

Author Hypothesis

Phase 2 Test

Problem Hypothesis


Phase 3 Test

Product Hypothesis

Test & Qualify Problem: First Contacts

!  Build a Rolodex !  Develop “Innovators” list !  Create reference story/sales script !  Schedule Customer Visits

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

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

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?

Test & Qualify Problem: Market Knowledge

!  Get a feel for the “lay of the land” !  Adjacent Market players !  Industry Influencers !  Key Analysts !  Attend Conferences/Tradeshows

Phase 3: Test Product Hypothesis

!  First reality check w/product development

!  The product hits the street !  Lots of customer visits !  More doses of reality Phase 1

Hypothesis Phase 2 Test

& Qualify Hypothesis


Phase 3 Test

Product Hypothesis

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

Test Product Hypothesis: Product Presentation

!  Questionnaire !  Start w/Problem Presentation !  Then describe the Product !  Demo if you have one

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

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

Education

Customer Development/Lean Startup 021610 Class 5