Improving Your Entrepreneurial Odds: the Customer Development Process. Steve Blank

Transcription

1 Improving Your Entrepreneurial Odds: the Customer Development Process Steve Blank

2 Some Definitions

3 !"#$$%&'()*+((%!,#-,'.(%!"#$"%&'!"#$$%&'()*+((% - Business Model found - Profitable business - Existing team < $10M in revenue 5.7 million small businesses in the U.S. <500 employees They employ 99.5% of our workforce

4 !,#$#-$+%!,#-,'.%!(#)#*)+'!"#$"%&' /#-0+% 12".#*3%,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process In contrast a scalable startup is designed to grow big It typically needs risk capital These are what Silicon Valley means when they say Startup

5 !,#-,'.(%!"#$"%&'!"#$$%&'()*+((% - Business Model found - Profitable business - Existing team < $10M!(#)#*)+'!"#$"%&' /#-0+% 12".#*3%,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process

6 X!"#$"%&'!,#-,'.(% X - Business Model found - Profitable business - Existing team < $10M X!"#$$%&'()*+((%!(#)#*)+'!"#$"%&' /#-0+% 12".#*3%,-.//012+#$' - Total Available Market > $500m - Company can grow to $100m/year - Known business model - Focused on execution and process

7 46+%./#*()01*%!(#)#*)+'!"#$"%&' 4-#*()52*% 3#$4+' 567&#82' - Founders depart - Professional Mgmt - Process - Beginning of scale

8 76#,8(%9%!,#-,'.:%!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82' - Business Model found - Product/Market fit - Repeatable sales model - Managers hired A Startup is the organization you use to search for your scalable business model

9 OUR COMPANY Device Software IP Services Product Networks - Technolog y - Customer - Data Partner Employees Resources

10 OUR COMPANY Device Software IP Services EE System Mechanica l Industrial Design Product Networks - Technolog y - Customer - Data Partner Standard Tooled Critical Components Sales & Distribution Users Employees Knowledge Resources Manufacturing

11 OUR COMPANY -' Device Software IP Services -' Sales & Distribution Product -' Design Users Networks - Technolog y - Customer - Data Partner -' Components Demand Creation Employees Resources -' Manufacturin g -' Customers

12 !,#-,'.(%;2*8,%/#(,%<2-+=+-%!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82' - Business Model found - Product/Market fit - Repeatable sales model - Managers hired - Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people You fail if you remain a startup!

13 The Search for the Business Model The Execution of the Business Model!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82' - Business Model found - Product/Market fit - Repeatable sales model - Managers hired - Cash-flow breakeven - Profitable - Rapid scale - New Senior Mgmt ~ 150 people

14 How Do Startups Search For A Business Model?

15 1'(,2"+-%;+=+$2."+*,%

16 More startups Fail from a Lack of Customers than from a Failure of Product Development

17 It Started With a Question If Startups Fail from a Lack of customers not Product Development Failure Then why do we have: process to manage product development? no process to manage customer development?

18 All We Had Was 30 Years of This Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship Product Development Model

19 It Resulted in a Few Hypotheses Startups weren t small versions of large companies They were about learning and discovery, not execution of a business model Entrepreneurs and their VC s were executing on guesses But the facts were outside the building

20 Which Turned Into A Model Product Development Concept/ Bus. Plan Product Dev. Alpha/Beta Test Launch/1st Ship + Customer Development Customer Discovery Customer Validation Customer Creation Company Building

21 Customer Development: Key Ideas Parallel process to Product Development Measurable Checkpoints Not tied to FCS, but to customer milestones Notion of Market Types to represent reality Emphasis is on learning & discovery before execution

22 Customer Discovery: Step 1 Customer Discovery Customer Validation Customer Creation Company Building Stop selling, start listening There are no facts inside your building, so get outside Test your hypotheses Two are fundamental: problem and product concept

23 Customer Discovery: Exit Criteria 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? Draw a day-in-the-life of a customer (archetypes) before & after your product Draw the org chart of users & buyers

24 Customer Validation: Step 2 Customer Discovery Customer Validation Customer Creation Company Building Pivot Develop a repeatable and scalable sales process Only earlyvangelists are crazy enough to buy Pivot back to Discovery if no customers

25 Customer Validation: Exit Criteria Can you draw your business model? Acquisition costs, path to profitability? Do you have a proven sales roadmap? Org chart? Influence map? Do you understand the sales cycle? ASP, LTV, ROI, etc. Do you have a set of orders ($ s) validating the roadmap?

26 Customer Creation: Step 3 Customer Discovery Customer Validation Customer Creation Company Building Creation comes after proof of sales Creation is where you cross the chasm It is a strategy not a tactic 3 2

27 Customer Creation Big Ideas! Big Idea 1: Grow customers from few to many! Big Idea 2: Four Customer Creation activities: " Year One objectives " Positioning " Launch " Demand creation! Big Idea 3: Creation is different for each of the three types of startups 3 3

28 Company Building: Step 4 Customer Discovery Customer Validation Customer Creation Company Building (Re)build your company s organization & management Re look at your mission 3 4

29 Company Building: Big Ideas! Big Idea 1: Management needs to change as the company grows " Founders are casualties " Development centric! " Mission-centric! " Process-centric! Big Idea 2: Sales Growth needs to match market type Customer Development in the High-Tech Enterprise October

30 Iteration versus Execution Iteration Execution Customer Discovery Customer Validation Customer Creation Company Building The Search for a Business The Growth of a Business Product/Market Fit

31 What They Didn t Teach You at Haas

32 1'(,2"+-%;+=+$2."+*,%B+-('(% C-2D'>,%E#*#0+"+*,% The Search for the Business Model The Execution of the Business Model!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82' - Hypothesis Testing - Minimum Feature Set - Pivots - Delivers MRD s - Feature Spec s - Competitive Analysis Customer Development Product Management

33 E+,-)>(%B+-('(%9>>2'*5*0% The Search for the Business Model The Execution of the Business Model!(#)#*)+'!"#$"%&' 9$#8:;<68' 567&#82' Startup Metrics - Customer Acquisition Cost - Viral coefficient - Customer Lifetime Value - Average Selling Price/Order Size - Monthly burn rate - etc. Traditional Accounting - Balance Sheet - Cash Flow Statement - Income Statement

34 /+#D+-(6).%B+-('(%E#*#0+"+*,%!(#)#*)+'!"#$"%&' 9$#8:;<68' 567&#82'

35 ;'-#*,%B+-('(%!$2#*%!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82'

36 Entrepreneurship School Business School!(#)#*)+'!"#$"%&' 9$#8:;<68' 3#$4+' 567&#82' - Hypothesis testing - Experiential - Hands-on - Chaotic - Leadership - Execution - Accounting - Management

37 Books Available on Amazon and Cafepress Four Steps to the Epiphany Not All Those Who Wander Are Lost Blog