Lean, Green Business Models for Start-ups: Customer Discovery and Development

Bringing Compelling, Financially Viable Solutions to Market to address Social and Environmental Challenges

Bike SharingBike share programs have revolutionized transportation in some of the country's largest cities, like Washington D.C., Minneapolis, Miami Beach and Boston. Popular overseas since 2007. Paris (16,000 bikes), London (8,000), and Hangzhou, China (65,000). New York launched it's own 10,000-bike version, Citi Bike, earlier this year.

LEED• The U.S. Green Building

Council's Leadership in Energy and Environmental Design system (LEED, for short) has revolutionized eco-conscious building initiatives across the globe. Companies looking to pump up their environmental track record are spending time and money to have their buildings certified green. LEED projects are in progress in 135 different countries,

Better ways to throw stuff away• The average American throws about

40 percent of their food away every year, and nearly 100 cities have launched composting programs to try and keep it out of landfills.

Curbside composting has spread across the country from uber-green San Francisco, which started their program 15 years ago and now collects more than 600 tons of compost daily.

Of the 250 million tons of trash created in the U.S. in 2010, 34 percent of it was diverted to composting or recycling programs, according to the EPA.

Homesteading/Urban Farms• Community gardening isn't really that new,

but the local food movement is. The demand for plots in p-patches or local green spaces has skyrocketed in the past few years as people opt out of GMOs and out-of-season produce

Sacramento plans to reclaim vacant lots for urban agriculture. Non profit Center for Land Based Learning manages 7 urban farms and places new farmers on them with $1 leases.

The U.S. Department of Agriculture estimated the local food industry to be $4.8 billion in 2008 and upwards of $7 billion in 2011.

Disruptive Technologies

Energy Harvesting

Dual Benefit SolutionsBreathing easy

A new startup set to improve our homes is Adaptavate. Founders Thomas Robinson and Alberto Fernandez Minguela have developed a plasterboard replacement made from agricultural waste. Unlike plasterboard, which is classified as hazardous waste, Breathaboard is compostable, so any on-site waste will add nutrients, not pollution, to the soil.

Robinson adds: “It’s breathable, preventing condensation and mould in the home, reducing diseases caused by damp housing like asthma. The breathability reduces the need for mechanical ventilation – cutting energy use.”

Customer Discovery & ValidationAKA - The First Two Steps to the Epiphany:

Getting to Product-Market Fit

Why Customer Development

• Move faster

• Reduce risk

• Bring process to chaos

• Stay in tune with customers

• Replace HiPPO & opinions with data

• Discover the best market opportunities

Customer Discovery

Who is Your Customer?

Phase 1 – State

Hypothesis

Phase 4 –Verify

Phase 3 –Test Product

Concept

Phase 2 – Test Problem Hypothesis

Map Your Ecosystem

• Who are the entities in your business?

• Connect the entities based on the flow of $$

• How does the product move through channels to meet users?

The Hypothesis : C-P-S• Customer

– Who is using your product?

• Problem– What problem do they have?

• Solution– How will you solve the problem?

Be Specific. It’s better to be wrong than vague.

Helping you map it: The Lean Canvas

Why do Research as a start-up?

• Test concept for demand and value before development, expensive ramp-up and launch

• Lower risk of dud product• Identify most attractive customer segments• Identify features, price, packaging, promotion

that optimizes demand and profitability• Identify competition, their value and how you

can compete against them

The Minimum Viable Product

• Map out the basics of your MVP based on the solutions from C-P-S

• Identify the riskiest parts & test them • This is before you build anything…just map out

what you think is the solution

BUILD

Agile Product Development

Exit Goals for Customer Discovery

• You’ve identified a problem a customer wants solved.

• Your product solve the customer’s needs.

• You believe you have a viable and profitable business model.

• You feel you’ve learned enough to go out and sell.

Customer Validation

Can You Sell It?

Phase 1 – Get Ready to

Sell

Phase 4 –Verify

Phase 3 –Develop

Positioning

Phase 2 – Sell to

Visionary Customers

Break Down Your Sales Road Map

• Who influences a sale?• Who recommends a sale?• Who is the decision maker?• Who is the economic buyer?• Who is the saboteur?• What is the budget for purchasing your type of

product?• How many calls does it take to make a sale• What is the profile of an early customer?

Map out the Food Chain of your Sale

Exercise: Make Your Food Chain

• Who is the end user?

• Who is the purchase decision maker?

• Who seeks out a solution like Yours?

• What are alternative channels?

Find out how to (reliably) get your foot in the door…

• At what level do you want to enter?

• How many people on the organizational map need to say yes?

• Does each department perceive the problem the same way?

• In what order do you need to call on people?

• Who can derail the sale?

The Gospel According to Blank – Phase 2: Sell to Visionary Customers

Goal: Get someone to Pay for your product and learn how to repeat the process.

Sales Funnel

Positioning

• Speak the language of your customer• Written by those that interact directly with the

customer• Verify with Product team to ensure what’s built

meets expectations set

The Gospel According to Blank – Phase 4: Verify

Goal: Verify all the work you’ve put into Customer Validation to iterate or move onto Customer Creation.

Questions to Ask…Product:-Are you repeatedly losing any deals? Why?-Are customers satisfied? What else do they expect?-Are you building the right features?-Were there any pricing issues? Did you lose customers on pricing?

Sales: -Can you verify the sales process and accurately project its success rate?-Can you realistically map your sales pipeline?-Are you closing deals?

More Questions to Ask…Channel:-Did you factor in the channel costs to the overall costs of your product?-How do various channels affect the sales time?-What does your sales force look like?

Business Model: -Based on known factors, how profitable is the business?-Will costs be the same as you grow?-How much funding do you need to reach profitability?

Customer Validation Wrap Up

To Exit means you’ve-Proven you found a Customer Problem-Found earlyvangelists that will pay you-Found a repeatable and scalable sales process-Demonstrated a viable business model

Customer Development in a Nutshell

Common Sense + Diligent Process + Thought =

Questions?

Further Reading - Books

The Lean StartupBy Eric Ries

Great high level overviewof all the principles of aLean Startup.

The Entrepreneur’s Guideto Customer DevelopmentBy Patrick Vlaskovits &

Brant Cooper

The Cliff Notes for LeanStartups; a must read for everyone on your team.

The Four Steps to theEpiphanyBy Steve Blank

The Bible of Lean Startups.Tough read, but excellentcontent.

Running LeanBy Ash Maurya

A practical guide to builda great lean startup fromthe creator of the lean canvas.

These books, especially 4 Steps, were key sources in creating this presentation & my learning of this methodology

Further Reading – Lean Related Blogs

• Steve Blank, Godfather of Lean Startups• Ash Maurya, Practitioner and action-oriented• Dave McClure, Investor, advisor, badass• Cindy Alvarez, Product manager at Kissmetrics • Andrew Chen, Metrics and Customer acquisition

expert

Further Reading – Helpful Presentations• The Customer Development Methodology

– by Steve Blank• Startup Metrics are for Pirates

– by Dave McClure• The Top 10 Reasons to not be a Lean Startup

– By Patrick Vlaskovits & Brant Cooper • 20 Ways not to build stuff

– by Cindy Alvarez• How to recruit and interview potential customers

– by Elizabeth Yin• Building Your Customer Development Plan

– by Cindy Alvarez• Minimum Desirable Product: Customer Development for the “Winner Take All” Web – by Andrew Chen