happy farm canvas and discovery bd
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BOB DORFallegedly retired serial entrepreneur
www.steveblank.com
An Introduction to Customer Developmentand the Business Model Canvas
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Our Agenda
•What’s a business model? • How do I use the business model?• How do I know if it’s any good?????
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Why 95+% of startups die?
• All product, no customers• No problem• The “lock step”• Premature scaling• No product/market fit• No more dough• …some of us will fail. Certainly it’s not YOU!
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Why 95% of Startups Fail…Product Introduction Model:
Two Implicit Assumptions
Customer Problem: known
Product Features: known
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
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No Business Plan survives first contact with customers
…get customer feedback as early as possible…it starts at the “idea” phase, not much later…and customers help you develop the product
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So Search for a Business Model
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The Business Model:
Any company can be described in 9 building blocks
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8images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
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CUSTOMER SEGMENTS
which customers and users are you serving? which jobs do they really want to get done?
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VALUE PROPOSITIONS
what are you offering them? what is that getting done for them? do they care?
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CHANNELS
how does each customer segment want to be reached? through which interaction points?
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CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
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REVENUE STREAMS
what are customers really willing to pay for? how? are you generating transactional or recurring
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14images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
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But,Realize They’re Hypotheses
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9 Guesses
Guess
Guess
Guess
Guess
Guess Gues
s
Guess
Guess
Guess
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Our Guesses DON’T Matter
• Anybody can build almost anything today(just a few exceptions: anti-gravity, transporters)
• What we need are CUSTOMERS!!• Build the customers while building product• …and let customer feedback and your coach guide
you all the way through the process!• note: Clones may be different!
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How Do You Search For A Business Model?
• The Canvas drives the planning process• The Search is Customer Development• Manufacturing iterates based on solid feedback
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Customer Development
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Customer Development
Get Out of the BuildingThe founders
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Customer DevelopmentThe Search For the Business Model
CompanyBuilding
CustomerDiscovery
CustomerValidation
Customer Creation
Pivot
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• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders
Customer Discovery
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
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TWO key Discovery phases
• FIRST: Does anybody care?…are we solving a serious problem?…are we filling a “big” need?
• THEN: Does our product do the job?…do they grab it out of your hands?…are they eager to tell their friends?
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Where it begins: Minimum Viable Product (MVP)
• Smallest feature set that gets you the most …orders, learning, feedback, failure…
• MVP + Customer are the first two you need to nail
• MVP is just 1 of the 9 parts of your model
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What’s a Minimum Viable Product?
• Google without ads• Zappos without inventory• Diapers.com without diapers
…Fewest possible features to make the point!…Why? It’s hard to truly react to a powerpoint
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Discovery: Not just “do you like it?”
• How big is the market? Not today…eventually!• Who’s the customer?– What’s their problem/need
• What’s the product/service/need?– Does it solve the customer’s problem?
• How do you create demand?• How do you deliver the product?• How do you make money?
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Hypotheses Testing and Insight
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Test Hypotheses:• Product• Market
Type•
Competition
Turning Hypotheses to Facts
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Test Hypotheses:• Problem•
Customer• User• Payer
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The Pivot
• The heart of Customer Development• Iteration without crisis• Fast, agile and opportunistic
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Three Great Pivots
• Steve Blank: “Page 6”• Perimeter: “there are 9000 of us”• Groupon: the $12billion pivot• …and hundreds more!
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Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
ExecutionSearch
Pivot
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Web/Mobile Versus Physical
• Web/Mobile startups run faster
• Different process steps for web vs. physical
• Customer Relationships are radically different
Customer
Discovery
Customer
Validation
Pivot
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Putting Discovery to Work
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Customer Discovery
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Who Do I Call On?
• Read the Startup Owner’s Manual• Network like heck• Cold calls are a badge of honor• Don’t worry about titles or the right person• …and DO NOT TALK…listen!
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What Do I Say?
• Remember you are 1st testing the problem• “Hi, I’ve been told you’re the smartest person
in this industry. We’re building x and I want to see if I understand the problem. I’d like 10 minutes of your time.”
• …give them choices that make them talk• …resist the strong temptation to sell
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I Have a Meeting – Now What?
• The goal is to test all hypotheses, but first: have you found “product/market fit”
• Does the customer care?• How do they solve this problem TODAY?• What channel do they use to buy?• Where will they go to find you?• How will you create demand?• How much will they pay? Do they pay today?
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Then what?
• Assemble all the data, organize/rank responses• Slam it against industry, third party resources• Get a tighter, more concise view of the market• …and adjust your Business Model as you go!
Next:• Test the “solution” in a very similar way• …and determine if you “pivot or proceed”
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But wait…there’s MORE!
When Discovery is DONE
Yeah who says…
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Business Model Canvas Score CardKey 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
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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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25
4 50
3
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
0
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When Customer Discovery is Done:Time to Ask for Money!
HINT: YOUR VC PITCH WAS HIDING IN THE LAST 12 SLIDES…DISCOVERY
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Who has completed serious Customer Discovery?
…an example from the USA
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Examples: Discovery Learning
• Too much process• Benefits too “soft” • The Philadelphia Architect• A day in the freezer
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Pivot ExampleRobotic Weeding
Talked to 75 Customers in 8 Weeks
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Our initial plan
Confidential
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20 interviews, 6 site visits…We got OUR Boots dirty
WeedingVisited two farms in Salinas Valley to better understand problem
Interviewed:• Bolthouse Farms, Large Agri-Industry in
Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa
Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator
MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of
maintenance and lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)
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Business Plan Autonomous Vehicles for Mowing & Weeding
We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)
Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider
Weeding- Farmers with manual weeding operations
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers- Mowing Dealers- Ag Dealers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Autonomous vehicles, GPS, path-planning
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Found weeding in organic crops is HUGE problem; 50 - 75% of costs
Crews of 100s-1000
Back-breaking task
(Illegal) labor harder to get
1-5 weedings per year/field
$250-3,500 per acre and increasing
Food contamination risk
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Decision to make – mowing vs. weeding
Application
If ROI is < 1 yr they will buy
Labor costs significant?
Autonomous would solve problem?
TAM
Mowing of large fields
Yes.Professional
ly run organizatio
ns
Yes Yes Adjusted up toxxx
Weeding in
Agriculture
Agri Industry:
YES!
Large Growers:
Yes
Small Growers:
No
YES! for organic crops
They are spending $500/ac!
Not necessarily
Key need is weed vs. crop differentiation
TAM increased to $2.6 B (Total
organic)
Target Market (organic
specialty) 162 M/yr18%/yr growth
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Autonomous vehicles WEEDING
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers
- Ag Dealers- Ag Service providers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Dealers- Ag Service providers
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Machine VisionTwo problems:- Identification- Elimination
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World Ag Expo interviews:the need is real and wide spread
• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude competitor
sells for $171 K
• Revenue Stream– Mid to small growers prefer a service– Large growers prefer to buy, but OK
with service until technology is proven– Charging for labor cost saved is OK, as
we provide other benefits (food safety, labor availability)
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Autonomous weeding - Final
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Direct- Provide high quality service at competitive price
Direct - Alliance with service providers- Eventually sell through dealers
- Innovation- Customer Education- Dealer training
Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Service providers
- Research Institutes (eg UC Davis, Laser Zentrum Hannover)
- 3-4 key farms
Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale
Engineers on Machine VisionTwo problems:- Identification- Elimination
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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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Customer Validation
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Questions?
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