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Startup School:Getting to Product-Market Fit - Part II(Talking to Humans)Frank RimalovskiExecutive Director, NYU Entrepreneurial InstituteAdjunct Faculty, Tandon School of EngineeringInstructor, NSF Innovation Corps (I-Corps)September 27, 2016

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Why are we here?Share ideas, tips, tricks and secrets on how to best do customer discovery

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Customer Development

Test assumptions about customer needs/problems & develop MVPs

Seek validationthat people are interested in your product/ solution

Begins to builddemand & improve efficiency of customer acquisition

Drive growth aggressively & execute business model

You are here

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Your job is not to validate your product…

Your job is not to validate your product…

It’s to validate the problem, who has it and

then how best to solve it?

@NYUEntrepreneur

“New ideas come from watchingsomething, talk(ing) to people, experimenting, asking questions and getting out of the office!”

@NYUEntrepreneur

The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market

Hypotheses & the BMC

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

HypothesisHypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

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More than half of your assumptions are wrong!

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@NYUEntrepreneur

Customer DiscoveryuApply the scientific method to

business model development

Modify hypothesis

Observe phenomena

Formulate hypothesis

Test hypothesis via rigorous experiments

Establish theory

based on repeated

validation of results

PIVOT!

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Goals of Customer Discovery

1. (In)validate problem/solution fit

2. (In)validate business model component hypotheses

3. Begin to identify & test Minimum Viable Products (MVPs)

u NOT to get statistical relevance, but pattern recognition to get insight

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Talk to Humans!u GOTB: The #1

lesson of this talk

u In person is best

u You must gaininsight into your customer & market

u You are doing pattern recognition… Must have sufficient data points to see andto test all elements of BMC!

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Who do you want to learn from?

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3A. Who Do You Want To Learn From (Inked)

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Who Cares?

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Do not fear picking the wrong market!

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Customers are Humans!

User Influencer Recommender DecisionMaker

SaboteurEconomicBuyer

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u Who is your “enthusiast”/early adopter initial target customer?

u List 5 characteristics of your early adopter customer (from Ex. 1)

o Job(s), title, industry, demographics, hobbies, sex, age, etc.

u Use LinkedIn or equivalent to identify individuals who share these characteristics

u After: Email asking for intros to 5 people they know who share these characteristics

Think small

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Early Adopter CustomerSegment/Industry

Org Size

Geography

Demographics

Title/Job

Age

Sex

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Early Adopter CustomerSegment/Industry Hospital

Org Size Large (>5,000)

Geography Urban/Surburban

Demographics Research/University

Title/Job Department Chair, Physical Therapy

Age 45-65

Sex M/F

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Finding Interview Subjects

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5A. How Do You Find Your Interview Subjects (Inked)

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Finding Interview Subjectsu At least one degree of separation

u Become a LinkedIn power user

u Make referrals happen

u Get creative…recruiting hacksu Fish where the fish are…

u …In the wild

u Promise to be briefu Enterprise customers are people too!

u Play the student/researcher card

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Example EmailTo: john.smith@mayflower.comFrom: me@me.com

John,

I am participating in a program at NYU and I am studying how small businesses owners are handling their expense report management workflows and the frustrations they are experiencing.

I see from LinkedIn that you know James Smith at Pinto Boats. I understand James has expertise in the area I am researching would love to speak with him.

Would you be willing to make an introduction to James so that I may have a 15-20 minutes conversation to ask him few questions about this?

Many thanks for your time and I look forward to hearing from you,

Jane Doe

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Meet People You Don’t Know

u People you know will be nice and tell you what you want to hear

u Those interviews are possibly harmful

u Let other teams use people you know

u People you don’t know have no relationship to protect…Only they will tell you the truth

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Exercise 1

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Cold Calling1. Volunteer team

2. Volunteer expert (use earliest adopter)

3. “Cold call” expert

4. Get them to take the call

5. Start questioning them

6. Others offer suggestions

7. Rinse & repeat until successful

8. Discuss

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Discuss: Observations, challenges & questions

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Pro Tipsu Practice, practice, practiceu NO email, focus groups or surveys

u Don’t start with your dream customeru Being an entrepreneur means being

aggressive & persistentu Leverage your network!

u Flatter subjectsu Be transparentu Follow up/stay in touch

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What do you want to learn?

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4D. What Do You Want To Learn

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@NYUEntrepreneur

What do you want to learn?

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The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market

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Don’t Assume You Understand the Problem!

bit.ly/2czMbCJ

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“(The great entrepreneurs) fall in love with

the problem, not the

solution.”

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Who cares?u Crafting good hypotheses is hard!

u Good hypotheses leads to good experimental design

u Good experimental design is important to properly validate or invalidate

u Key to getting to PMF & a MVP

u Seek help from mentors & coaches!

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Hypotheses Must Be…

uQuantifiable

uRelevant

uSpecific

uTestable

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Design a TestuAll tests start with: get out of the

building and talking to people

uDo not try to be statistically valid, but do seek quantification

uDo not stop once you get an answer

uAvoid premature capitulation

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Ensuring effective interviews

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6B. How To Ensure An Effective Session (Draft)

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Do not sell!

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Do not sell!u No demos! No presentations! No tech talk!

u Get stories, not speculation

u Ask open-ended questions

u Ask how they do their job, about their problems, & how they solve them today

u It’s about them. Not you. Not your product.

u Ask why? Then why? They why again!

u Create a guide (not a script)

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Ensuring Effective Interviews

u Beware of confirmation biasu Do it in person, one at a time

u Get subjects to tell a story

u Look for solution hacksu Understand their priorities

u Follow your nose & drill down

u Listen and shut up!

u Have someone take notes

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Exercise 2

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Your Last >$100 Purchase1. Write description of item on top of page2. Find a partner next to you & swap pages3. Create interview guide: ~5 questions

o Explain what you bought and why?

o What was the process from desire to acquisition?

o What other options/alternatives did you consider?

o How did you decide to buy it? Who/what did you consult?

o How did you decide where to buy it?

4. 5 minute interview…take notes5. Switch

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Discuss: Observations, challenges & questions

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Focus on actual behaviorNot speculative or abstract feelings

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Art of Multi-Person Interviews

bit.ly/2dqfugI

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Documenting Interviewsu Assign someone to take notes

u Write down key a-ha’s as they happen

u Note questions that worked & use them again!

u Take pictures or videos!

u Write up & share key insights with your team ASAP!

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What About IP?

uNever sign an NDA

uNever ask people to sign an NDA

u If you are describing your tech in

detail, you are doing it wrong

uFocus on the what & not the how

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How do you make sense of what you learn?

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7B. How Do You Make Sense Of What You Learn (Draft)

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Gaining Insightu Facts are interesting…Insights are your goalu Be honest…Don’t be too quick to validate or

too slow to disprove your hypothesis

u Don’t just scratch the surface, dive deep

u Find the hidden motivationsu Ask why? And why? Then why again?

u Don’t fear picking the wrong marketu Depth of understanding always leads to

insight

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What’s an insight?(the a-ha’s along your journey)

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in•sight |ˈinˌsīt|nounthe capacity to gain an accurate and deep intuitive understanding of a person or thing

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in•sight |ˈinˌsīt|nounsomething you’re so excited about you tell strangers on the train

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Create an Interview Guideu A guide, not a script

u Helps to keep you organized & on point!

u Appear more professional, & ensure you get most important questions early

u Test your Customer Segment & Value Proposition hypotheses

u List 5-8 questions to test your Value Proposition hypotheses with your initial target Customer Segment(s)

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Sample Questions1. How would you describe your role as a

____________?

2. What does success in your role look like to you?

3. What is the hardest part about achieving that?

4. When was the last time you tried to solve that?

5. Can you tell me about the last time it happened?

6. Why is it a problem for you?

7. How did you find your current solution?

8. What is not ideal about this solution?

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Learning Is Paramountu The knowledge you gain in customer

discovery is critical to the success or failure of your business

u >Half of your assumptions are wrong

u You must not try to validate what you already think or want to be true

u Leverage mentors & coaches to help synthesize insights & identify patterns

@NYUEntrepreneur

Pro Tipsu Focus on actual behavior, not

speculative or abstract feelingsu If they’ve made an MVP…ask to see it!u Listen, don’t talku Follow your nose & drill downu Parrot back or misrepresent to confirmu Ask for introductionsu Write up your notes ASAPu Avoid premature conclusions

@NYUEntrepreneur54

“It's grueling listening to

customer feedback. And

if it isn't, you're probably doing it wrong."

@NYUEntrepreneur

Your job is not to validate your product…

Your job is not to validate your product…

It’s to validate the problem, who has it and

then how best to solve it?

@NYUEntrepreneur

Required Reading/Viewing

TALKING TO HUMANS

Success starts with understanding your customers

GIFF CONSTABLE

Pre-release edition

with Frank Rimalovskiand illustrations by Tom Fishburne

bit.ly/llpcdvstalkingtohumans.com

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What did you say?

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slideshare.net/NYUEntrepreneur

youtube.com/user/NYUEIMedia

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Helping startups start up

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Tuesday 10/4, 4pmSizing Up Your Market & Competition

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1 Attend next week’s Startup School

bit.ly/nyustartupschool

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2 Meet with a Blackstone Launchpad coach

Say you went to Startup School!

entrepreneur.nyu.edu

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3 Apply to the NYU Prototyping Fund

Up to $500 to build your prototype!Deadline is Sep 30!!!

bit.ly/PrototypingFall16

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4 Enter the $300k NYU Entrepreneurs Challenge

Training & coaching for your startup!Deadline to Enter is Oct 6!

bit.ly/NYU300k

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Questions?

entrepreneur@nyu.edu@nyuentrepreneurentrepreneur.nyu.edu16 Washington Place

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