Henrik Berglund, Venture Cup, feb 2013
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Transcript of Henrik Berglund, Venture Cup, feb 2013
Henrik BerglundChalmers University of Technology
Center for Business [email protected]
www.henrikberglund.com@khberglund
Business Models/Customer Development
2013-02-15 1
by Steve Blank and Bob Dorf
More info: www.steveblank.comBuy the book: http://www.amazon.com/gp/product/0984999302/
Presentation based on
developed by Steve Blank and Bob Dorf
http://www.slideshare.net/sblank/
Using slides from
Agenda
1. Startups 2. Business Models (briefly)3. Customer Development
Part 1
Startups(What We Used to Believe
What We Now Know)
What We Used to Believe
Startups are a Smaller Version of a Large Company
What We Now Know
Startups ≠ Small companies
Startups Search Companies Execute
What We Used to Believe
Strategy
Start by developing a Business Plan…
…make the financial forecasts…
…then Execute
What We Now Know
Strategy
5-Year Plans
Develop and Execute the Business Plan
Why?
No Business Plan survives first contact with customers
“Everybody has a plan until they get punched in the face” Mike Tyson
Searching for a Business Model comes before
Executing a business plan
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Models
http://www.businessmodelalchemist.com/
Business Model Hypotheses
Search
Strategy
Execution
Operating Plan +Financial Model
What We Used to Believe
Process
We Built Startups by Managing Processes
Product Management+
Waterfall Engineering
Traditional Development Process
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
Traditional Development ProcessHas Two Implicit Assumptions
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
Customer Problem: known
Product Features: known
Works well for incremental development projects targeting existing customers.
Tradition – Hire Marketing
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
Marketing
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Sales
- 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
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Business Development
- 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
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
- Hire First Bus Dev - Do deals for FCSBusiness Development
Examples - Recognize these?
What’s wrong with this picture?
• Both Customer Problems and Product Features are hypotheses
• Emphasis on execution rather than learning and discovery
• No relevant milestones for marketing and sales• Often leads to premature scaling and a heavy
spending hit if product launch fails
You do not know if you are wrong until you are out of money/business
Concept 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
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
- Hire First Bus Dev - Do deals for FCSBusiness Development
What We Now Know
Process
Product and Customer Development
Product Development
Customer Development
CompanyBuilding
CustomerDiscovery
CustomerValidation
Customer Creation
+
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
Problem: unknown Solution: unknown
Product and Customer Development
Business Model Hypotheses
Strategy
Process Customer &Agile Development
Operating Plan +Financial Model
Product Management& Waterfall Development
Search Execution
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
Business Model Hypotheses
OrganizationCustomer
Development Team, Founder-driven
Customer Development,Agile Development
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Search ExecutionStrategy
Process
Part 2
Business Models
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Model
http://www.businessmodelalchemist.com/
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Model
A framework for making your assumptions explicit
Customer Segments
Who are the customers?Why would they buy?
Customer Segments
Who is the customer?Multi-sided market?Different from user?
http://www.businessmodelalchemist.com/2012/08/achieve-product-market-fit-with-our-brand-new-value-proposition-designer.html
Customer Segments- jobs to be done
What functional jobs is your customer trying get done? (e.g. perform or complete a specific task, solve a specific problem…)
What social jobs is your customer trying to get done? (e.g. trying to look good, gain power or status…)
What emotional jobs is your customer trying get done? (e.g. esthetics, feel good, security…)
“What jobs are the customers you are targeting trying to get done”
Customer Segments- customer pains
What does your customer find too costly? (e.g. takes a lot of time, costs, effort)
What makes your customer feel bad? (e.g. frustrations, annoyances)
How are current solutions under-performing for your customer? (e.g. lack of features, performance, malfunction)
What negative social consequences does your customer encounter or fear? (e.g. loss of face, power, trust, or status)
“What are the costs, negative emotions, bad situations etc. that your customer risks experiencing before, during, and after getting the job done.”
Customer Segments- customer gains
Which savings would make your customer happy? (e.g. in terms of time, money and effort)
What would make your customer’s job or life easier? (e.g. flatter learning curve, more services, lower cost of ownership)
What positive social consequences does your customer desire? (e.g. makes them look good, increase in power, status)
What are customers looking for? (e.g. good design, guarantees, features)
What do customers dream about? (e.g. big achievements, big reliefs)
“What are the benefits your customer expects, desires or would be surprised by.”
Value Propositions
What are you building?For whom?
Value Propositions
What are your products and services?
How do they create value for the customer segments?
Value PropositionsCan your product/service:
• Produce savings?
• Make your customers feel better?
• Put an end to difficulties?
• Wipe out negative social consequences?
Value PropositionsCan your product/service:
• Outperform current solutions?
• Produce outcomes that go beyond their expectations?
• Make your customer’s job or life easier?
• Create positive social consequences?
Product Market FitGetting this right is essential!
Product Market Fit
Getting this right is essential!
Channels
How does your product get to customers?
How Do You Want Your Product to Get to Your Customer?
60
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
üüüüü
Web Channels
61
Physical Channels
62
How Does Your Customer Want to Buy Your Product from your Channel?
63
• Same day
• Delivered and installed
• Downloaded
• Bundled with other products
• As a service
• …
üüüüüü
Customer Relationships
How do you get/keep/grow customers?
Customer Relationships
Revenue Streams
How do you make money?
Key Resources
What are your most important assets?
Key Activities
What activities are most important for the business?
Key Partnerships
Who are your key partners and suppliers?
Cost Structure
What are the costs of operating the business model?
Visualization of the business model
framwork
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
What’s a Company?
What’s a Company?
A business organization, which sells a product or service in exchange for revenue
and profit
How are Companies organized?
How are Companies organized?
Companies are organized around Business Models
How are Companies organized?
Companies are organized around Business Models
What’s a Startup?
What’s a Startup?
A temporary organization designed to search
for a repeatable and scalable business model
What’s a Startup?
A temporary organization designed to search
for a repeatable and scalable business model
What’s a Startup?
A temporary organization designed to search
for a repeatable and scalable business model
Guess Guess
Guess
Guess
Guess
Guess
Guess
GuessGuess
The goal is not to remain a startup
Startup Large Company
The goal of a startup is to become a large company!Failure = failure to transition.
Transition
Part 3
Customer Development
To repeat
More startups fail from a lack of customers than from a failure of
product development…
To repeat
… because they think startups = small companies…
…they focus on executing the plan…
• Both Customer Problems and Product Features are hypotheses
• Emphasis on execution rather than learning and discovery
• No relevant milestones for marketing and sales• Often leads to premature scaling and a heavy
spending hit if product launch fails
You do not know if you are wrong until you are out of money/business
Concept Product Dev. Alpha/Beta Test
Launch/1st Ship
… so they scale on untested assumptions…
… and end up going bust.
“We have been too visionary. We wanted everything to be perfect, and we have not had control of costs"
Ernst Malmsten(BBC News, May 18 2000)
So what to do?
Customer Development: Key Ideas
• Parallel process to Product Development (agile)
• Measurable checkpoints not tied to FCS but to customer insights
• Emphasis on iterative learning and discovery before execution
• Must be done by small team including CEO/project leader
Customer Development Heuristics
• There are no facts inside, so get out of the building!
• Earlyvangelists make your company, and are smarter than you!
• Develop a minimum viable product to maximize fast learning.
•Customer Discovery Articulate and Test your Business Model Hypotheses•Customer Validation Sell your MVP and Validate your MB & Sales Roadmap•Customer Creation Scale via relentless execution and fill the sales pipeline•Company Building (Re)build company’s organization & management
Customer Development: Four Stagessearch
execution
Customer Discovery
• Articulate and test your BM hypotheses(value prop/customers key)
• No selling, just listening• Must be done by founder
building
blockbuildingblock
buildingblock
buildingblock
buildingblock
building
block
buildingblock
buildingblock
building
block
buildingblock
buildingblock
buildingblock
Sketch out your business model!
But,Realize it’s just Hypotheses!
Guess Guess
Guess
Guess
Guess
Guess
Guess
GuessGuess
”Do you have this problem?”1.2.3.
Test Customer Problem Hypotheses
”Do you have this ”Tell me about it, how problem?” do you solve it today?”1. 1.2. 2.3. 3.
Test Customer Problem Hypotheses
”Do you have this ”Tell me about it, how ”Does something like thisproblem?” do you solve it today?” solve your problem?”1. 1. 1.2. 2. 2.3. 3. 3.
Listen carefully to what they say at each step!
Focus on learning - Don’t try to sell them on your idea!
In the process you find out about other BM parts as well: workflow, benefits (to users & others), preferred channels, critical influencers, respected peers etc…
You want to become a domain expert!
Test Customer Problem Hypotheses
Finding people
Introductions (ask everyone you know)
• Provide the exact text that they can copy and paste into a tweet or email (They’re doing you a favor! Make it as easy as possible for them)
• Tell them exactly how you are going to communicate with their contacts (They’re risking a bit of social capital for you. Be very clear that you won’t spam or annoy people)
• Tell them your goals (What do you think you’ll get/learn if they make this intro for you? People want to know that they’re contributing to a bigger picture!)
Finding people
AdWords, Facebook Ads, Promoted Tweets
Summarize your idea and get it in front of people who have expressed an interest in it by having searched for your keywords and clicked your ad – get conversations (and/or test hypotheses using landing pages).
http://www.cindyalvarez.com/best-practices/customer-development-interviews-how-to-finding-people
Finding people
Twitter Search
Look for people who have already discussed a similar product, problem, or solution and address a tweet directly to them:
“@username Would love yr feedback on [product/problem/solution] – shd only take 2mins [URL] thanks!”
Finding people
Google Alerts
Set up Google Alerts for your product/problem/solution – when it finds relevant blog posts or comments, email and ask for feedback:
“I read your [post/comment] about [product/problem/solution]. I’m currently working on a related idea and I think your opinion would be very valuable to me – could you take 2 minutes and check out [URL]? Thank you – I’d be happy to return the favor any time.”
Interview tips
http://www.giffconstable.com/2011/07/12-tips-for-customer-development-interviews-revised/
Much faster to build => get quantitative feedback sooner.
Use a low-fi landing page as substitute for – and introduction to – conversations.
Key to drive traffic through AdWords/Facebook Ads/Promoted Tweets etc.
Build (design test), measure (run test) and analyze (evaluate test)!
Web
http://blog.kissmetrics.com/landing-page-blueprint/
Landing page design
Reality check!
CustDev and ProdDev teams meet and discuss the lessons learned from the field.
”Here is what we thought about customers and their problems, here is what we found out”
BM hypotheses, product specs or both are jointly revised.
Test Solution Hypothesis
1) ”We believe you have this important problem” – listen (check). 2) Demo how your product solves the problem. Focusing on a few key features.
Include workflow story: ”life before our product” and ”life after our product” – listen!
3) ”What would this solution need to have for you to purchase it?” Listen, ask follow up questions.
Dropbox
• 1st solution test: a three minute video made in the founder’s apartment before a complete code was written.– Generated valuable feedback from visionary customers.
• 2nd solution test: another video of the product that was posted on a social network.– Waiting list jumped from 5 000 to 75 000.
• Dropbox’s original intent was to build and ship their product in eight weeks.
• Instead, they gathered feedback and launched a public version 18 months later.
Test Product Hypotheses
After demoing, ask about other things: Positioning – how do they describe the product?Product category (new, existing, resegmented)CompetitorsFeatures needed for first versionPreferred revenue modelPricingAdditional service needsMarketing – how do they find this type of product?Purchasing processWho has a budget?etc.
Build out a high-fidelity web page with “functioning” back-end, based on lessons learned.
“Mechanical Turk”-solution.
Ask for money: first “pre-order” then charging.
Continue to test, measure and analyze!
Web
Reality check!
CustDev and ProdDev teams meet and discuss the lessons learned.
”Here is what we thought about product features and here is what we found out”
BM hypotheses, product specs or both are again jointly revised.
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 for it?
Can you draw a day-in-the-life of a customer?Before & after your product
Can you draw the org charts of users, buyers and channels?
Customer Discovery: Exit Criteria
Customer Validation
• Develop and sell MVP to passionate earlyvangelists• Validate a repeatable sales roadmap• Verify the business model
Based on your insights from Customer Discovery, sell the smallest feature set customers are willing to pay for!
• Purpose 1: Reduce wasted engineering hours (and wasted code)
• Purpose 2: Get something into the hands of earlyvangelists as soon as possible => maximize learning!
Minimal Viable Product
The Apple I, Apple’s first product, was sold as an assembled circuit board and lacked basic features such as a keyboard, monitor and case.
The owner of this unit added a keyboard and a wooden case.http://en.wikipedia.org/wiki/Apple_Inc.
The MVP is not the goal = Requires commitment to iteration!
• “A complex system that works is invariably found to have evolved from a simple system that worked.”
• “A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a working simple system.”
Minimal Viable Product
Not helpful
Jackpot!
1. Has a problem
2. Understands he or she has a problem
3. Actively searching for a solution
4. Cobbled together an interim solution
5. Committed and can quickly fund a solution
Types of earlyvangelists
Do you have a proven sales roadmap?Organization chart? Influence map?No staffing until roadmap is proven!
Do you have a set of orders ($’s) of the product validating the roadmap?
Is the business model scalable?LTV > CAC, Cash
Customer Validation: Exit Criteria
If yes – Start executing
If no – Pivot!
• The heart of Customer Development
• Change without crisis (and without firing executives)
“The idea that successful startups change directions but stay grounded in what they've learned”
Pivot
Adapt the Business Model until you can prove it works
search
execution
• Grow customers from few to many
• Comes after proof of sales
• Inject $’s for scale
• This is where you “cross the chasm”
• “Growth Hacking”
Customer Creation
• (Re)build company’s organization & management• Dev.-centric Mission-centric Process-centric
Company Building
•Customer Discovery Articulate and Test your Business Model Hypotheses•Customer Validation Sell your MVP and Validate your BM & Sales Roadmap•Customer Creation Scale via relentless execution and fill the sales pipeline•Company Building (Re)build company’s organization & management
Summary – Customer Development
Don’t do a Boo!Concept Product Dev. Alpha/Beta
TestLaunch/1st Ship
“We have been too visionary. We wanted everything to be perfect, and we have not had control of costs"
Ernst Malmsten(BBC News, May 18 2000)
Henrik BerglundChalmers University of Technology
Center for Business [email protected]
www.henrikberglund.com
@khberglund
Tack!
2013-02-15 143
by Steve Blank and Bob Dorf
More info: www.steveblank.comBuy the book: http://www.amazon.com/gp/product/0984999302/
Presentation based on
developed by Steve Blank and Bob Dorf
http://www.slideshare.net/sblank/
Using slides from