customer development at startup2startup
TRANSCRIPT
The Customer Development Model
Steve Blank
Stanford School of Engineering /
UC Berkeley, Haas Business Schoolwww.steveblank.com
Eric Ries
The Lean Startup
Startuplessonslearned.blogspot.com
Conundrum
• We have process to manage product development
• We have no process to manage customer development
Build a Customer Development Process
Concept/Bus. Plan
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Product Development
Customer Development
? ? ? ?
Customer Development and Product Development
Concept/Bus. Plan
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Product Development
Customer Development
CompanyBuilding
CustomerDiscovery
CustomerValidation
Customer Creation
Customer Development: Key Ideas
• Parallel process to Product Development (agile)
• Measurable Checkpoints
• Not tied to FCS, but to customer milestones
• Notion of Market Types to represent reality
• Emphasis is on learning & discovery before execution
• Stop selling, start listening– There are no facts inside your building, so get outside
• Test your hypotheses – Two are fundamental: problem and product concept
Customer Discovery: Step 1
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
Customer Discovery: Exit Criteria
• 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
Customer Validation: Step 2
CustomerDiscovery
CustomerValidation
Customer
Creation
CompanyBuildin
g
• Develop a repeatable and scalable sales process
• Only earlyvangelists are crazy enough to buy
Customer Validation: Exit Criteria
• 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?
• Does the financial model make sense?
New Product Conundrum
• New Product Introductions sometimes work, yet sometimes fail– Why?– Is it the people that are different?– Is it the product that are different?
• Perhaps there are different “types” of startups?
Three Types of Markets
• Who Cares?• Type of Market changes EVERYTHING• Sales, marketing and business development
differ radically by market type• Details next week
Existing Market Resegmented Market
New Market
Type of Market Changes Everything
• Market– Market Size– Cost of Entry– Launch Type– Competitive
Barriers– Positioning
• Sales– Sales Model– Margins– Sales Cycle– Chasm Width
Existing Market
Resegmented Market
New Market
• Finance• Ongoing Capital
• Time to Profitability
• Customers• Needs
• Adoption
Definitions: Three Types of Markets
• Existing Market– Faster/Better = High end
• Resegmented Market– Niche = marketing/branding driven– Cheaper = low end
• New Market– Cheaper/good enough can create a new class of
product/customer– Innovative/never existed before
Existing Market
Resegmented Market
New Market
Problem: known Solution: known
Waterfall
Traditional Product DevelopmentUnit of progress: Advance to Next Stage
Requirements
Design
Implementation
Verification
Maintenance
Problem: Known Solution: Unknown
“Product Owner” or in-house customer
AgileUnit of progress: a line of working code
Problem: Unknown Solution: Unknown
Product Development at Lean StartupUnit of progress: validated learning about customers ($$$)
First Steps
• Fact-based culture, built to learn• Decide on business model
– What are the "fundamental drivers of growth”
• Create a decision loop (build-measure-learn)
• Write your hypotheses down (3 diagrams)– Business model, distribution channel, demand creation
• Prove it in micro-scale
Execution
• Relentless execution• Team needs to be true believers not employees • Focus on the few things that matter • Don’t confuse your hypothesis with facts• Continuous customer contact • Only you can put your company out of business
General Principles
• If you think entrepreneurship is about the money become a VC
• If everyone else thinks it’s a bad idea that may be a good sign
• The better your reality distortion field the more you need to get outside the building
• Ethics and values are about what you practice when the going gets tough
Further Reading
Course Text at: www.cafepress.com/kandsranch
Blogs www.steveblank.com
http://startuplessonslearned.blogspot.com/
There’s much more…
IDEAS
CODEDATA
BUILDLEARN
MEASURE
Code FasterUnit Tests
Usability TestsContinuous Integration
Incremental DeploymentFree & Open-Source Components
Cloud ComputingCluster Immune System
Just-in-time ScalabilityRefactoring
Developer Sandbox
Measure FasterSplit TestsClear Product OwnerContinuous DeploymentUsability TestsReal-time MonitoringCustomer Liaison
Learn FasterSplit TestsCustomer InterviewsCustomer DevelopmentFive Whys Root Cause AnalysisCustomer Advisory BoardFalsifiable HypothesesProduct Owner AccountabilityCustomer ArchetypesCross-functional TeamsSemi-autonomous TeamsSmoke Tests
Funnel AnalysisCohort Analysis
Net Promoter ScoreSearch Engine Marketing
Real-Time AlertingPredictive Monitoring
Thanks!
• Startup Lessons Learned Blog– http://startuplessonslearned.blogspot.com/
• Webcast: “How to Build a Lean Startup, step-by-step”– May 1, 2009 at 10am PST– http://www.oreillynet.com/pub/e/1294
• The Lean Startup Workshop– An all-day event for a select audience– May 29, 2009 in San Francisco– Sign up at: http://bit.ly/a5uw8