Post on 20-Aug-2015
Business Models & Customer Development
www.steveblank.com@sgblank
Teaching Points
Objective
• Review basics• Emphasis on how to teach it
Student Assignments & ToolsIn-Class
Student Assignments & ToolsBetween Class
Student Assignments & Tools
Teaching Team Responsibilities &ToolsIn-Class
Teaching Team Responsibilities &Tools Between Class
Teaching Team Responsibilities &Tools
Business Model Canvas
Why?How?
Why?
This Class
TEACHING POINT
The Search for a Path
1602 - 1908
© 2012 Steve Blank
Business Schools
TEACHING POINT
The MBA the Path to Business Execution
Business Schools
• Made the American Century• Embraced entrepreneurship
– Myles Mace HBS 1947, Stanford 1953– But as an activity you execute
• Now embracing search
TEACHING POINT
Startups Search Companies Execute
Why?
Startups are Not Smaller Versions of a Large Company
Search versus Execution
TEACHING POINT
Startups versus existing companies
• That startups begin with a series of unknowns (mostly)– They Search
• That existing companies deal with execution of knowns (mostly)– They Execute
• The insight is that management tools built to execute do not work in search
• Early stage ventures need their own tools
TEACHING POINT
What’s a Startup?
Why?
Why a definition of a startup?
TEACHING POINT
What’s A Startup
A temporary organization designed to search for a repeatable and scalable business model
• This is what the class is about• It’s a definition filled with action• Each word has meaning
– Temporary– Search– Repeatable– Scalable– Business Model
TEACHING POINT
What We Used to Believe
Strategy
Start With an Operating Plan and Financial Model
What We Now Know
Strategy
Planning comes before the plan
Business Models
Why?
Business Model versus Business Plan
TEACHING POINT
Business Model versus Business Plan
• We are not saying never to a business plan• We are saying, “not first”• Plans are static• Models are dynamic• Planning comes before the plan
TEACHING POINT
What We Used to Believe
Process
Product Introduction Model
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Marketing
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
Marketing
Tradition – Hire Sales
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Build Sales Organization
Marketing
Sales• Hire Sales VP• Hire 1st Sales Staff
Tradition – Hire Bus Development
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Tradition – Hire Engineering
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Engineering • Write MRD
• Waterfall • Q/A • Tech Pubs
Customer Problem: known
Product Features: known
Waterfall / Product ManagementExecution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Rieshttp://startuplessonslearned.blogspot.com
What We Now Know
Process
More startups fail from a lack of customers than from a failure of product development
Customer Development
Agile Development
+
Why?
Customer & Agile Development versus Product Launch and Waterfall
TEACHING POINT
Customer & Agile Development versus Product Launch and Waterfall
• Product Launch process assumes hypotheses are facts• Waterfall development assumes you know:
– the customer problem– Entire solution
TEACHING POINT
What We Used to Believe
Organization
Hire and Build a Functional Organization
What We Now Know
Organization
Founders run a Customer Development Team
No sales, marketing and business development
Why?
Functional Organizations
TEACHING POINT
Functional Organizations
• An easy trap for startups• Large companies have VP’s of Sales, Marketing &
Business Development• I guess we should too• Titles are the same, functions are radically different
TEACHING POINT
How?
Business Model Canvas
TEACHING POINT
The Canvas in Class
• Forces students to articulate all 9 parts of a business model (static)
• Used to keep score of customer development progress (dynamic)
• Allows visualization of the entrepreneurial process• 9 boxes provides a convenient tempo for weekly classes
Different from Osterwalder's original intent - strategy
TEACHING POINT
What’s a Business Model?
Value Proposition
What Are You Building and For Who?
Customer Segments
Who Are They?
Why Would They Buy?
Multiple Customer Segments
TEACHING POINT
Multiple Customer Segments
• Might have multiple segments of users• Might have users and payers• Might have 5 or 6 different customers
– Medical devices have doctors, hospitals, patient, insurance company, FDA, etc.
• For every customer segment you need:– Value proposition– Revenue model– And may have unique channels, cust relationships, etc.
TEACHING POINT
Product/Market Fit
Value Proposition + Customer Segment
TEACHING POINT
Product/Market Fit
Does the Value Proposition MVP match the Customer Segment Archetype?
TEACHING POINT
TEACHING POINT
THIS IS THE TOOL TO TEST PRODUCT/MARKET FIT
Channels
How does your Product Get to Customers?
Customer Relationships
How do you Get, Keep and Grow Customers?
We define Customer Relationships as Get, Keep and Grow
Different and more actionable than Osterwalder
TEACHING POINT
TEACHING POINT
Revenue Streams
How do you Make Money?
Key Resources
What are your most important Assets?
Key Partners
Who are your Partners and Suppliers?
Key Activities
What’s Most Important for the Business?
Cost Structure
What are the Costs and Expenses
How?
Business Model Canvas Components
TEACHING POINT
Canvas Components
• We overview all the 9 boxes in the first lecture• Subsequent classes detail each of canvas components• But that’s a sleight of hand• What we are really doing is getting the students to talk to
100 customers in a quarter• The class is not about the lectures• It’s about the work the students do outside the building
TEACHING POINT
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
How?
Customer Development
TEACHING POINT
Customer Development
• While so far the class looked like an easy business model canvas class …
• The class is actually all about Customer Development!• Drawing the canvas hypotheses are easy• Testing them is really, really hard• Just like a startup
TEACHING POINT
Customer Development
Test the Problem, Then the Solution
How?
Test the problem, then the solution
TEACHING POINT
Test the Problem then the Solution
• Customer development is about hypothesis testing• It’s why scientists do great in this class• What are you testing? All the nice, neat assumptions in
the business model canvas• First, you test basic assumptions • Then, you test the solution itself• Customer discovery and validation is a fairly rigorous
process
TEACHING POINT
Customer Development
The Minimum Viable Product
How?
Build the minimum viable product
TEACHING POINT
Build the minimum viable product
• This is easy if you use Agile development• You build your product iteratively and incrementally • The goal is feedback, learning, insight, orders, etc. with
the minimum feature set
TEACHING POINT
Customer Development
The Pivot
How?
The Pivot
TEACHING POINT
The Pivot
• A core concept of Customer Development• In the past a failure to make “the plan” meant a failure of
an individual to execute• In the past we fixed problems and changed strategies by
firing executives• Now we first fire the plan• A pivot is a substantive change in one or more business
model canvas components• An iteration is a minor change in one or more business
model canvas components
TEACHING POINT
Customer Development
Done By the Founders
Customer Development
Canvas to Keep Score
How?
Keeping Score with the Canvas
TEACHING POINT
Keeping Score with the Canvas
• A core concept of the class• Weekly updates of the canvas allow the teaching team to
visually see customer development process• Visualize the canvas extending in the Z-axis• That axis represents the customer development process
over time
TEACHING POINT
Customer Development
Details
Customer Development is how you search for the model
Customer Development
Physical vs. Web/Mobile Products and Channels